updated 12/27/2012 2:49:02 PM ET 2012-12-27T19:49:02

HARDBALL
December 21, 2012

Guests: Mick Mulvaney, Bryan Bender, Robert Costa, Steve Siebold

MICHAEL SMERCONISH, GUEST HOST: Fiscal cliff-hanger.

Let`s play some HARDBALL.

Good evening. I`m Michael Smerconish, in tonight for Chris Matthews.

We`re expecting President Obama to make a statement on the fiscal cliff
from the White House in just a moment. The statement comes after an
embarrassing defeat last night for House Speaker John Boehner. He had to
pull his own fiscal plan because he couldn`t get his own party to vote for
it. And now the fiscal cliff talks are up in the air.

NBC`s Mike Viqueira is on Capitol Hill for us tonight as we await the
president. Mike, what are we anticipating?

MIKE VIQUEIRA, NBC CORRESPONDENT: Well, we`re anticipating that the
president is going to come out and talk about where negotiations stand at
this point, and as far as we know, they`re pretty much nowhere, Michael.

We`re sifting through the wreckage of what happened here in the House of
Representatives last night. I mean, a lot of people are looking at this
and saying the president has doubled up on his victory on election day, his
battlefield victory. He has routed the enemy. He`s chased them into the
woods. And what happened last night was a reckoning for the Republican
Party.

They are fractious, by their own admission. John Boehner cannot negotiate
now. If he didn`t have the votes for his plan B that set that income
threshold at $1 million, I mean, there`s no way in the world he gets
anywhere close to the amount of votes he`s going to need for the latest
negotiating position for the president, which was up from $250,000 to
$400,000 for married couples filing jointly. So that`s where we are right
now.

I mean, the threshold question all along is, Would John Boehner put
something on the floor of the House of Representatives that required him to
pass by majority Democratic support and lose the majority of his party --
the Republican Party? I`m here to tell you, Michael, that simply doesn`t
happen. He`s not going to do that.

SMERCONISH: Is it good or -- is it good or bad news for the president,
Mike, insofar as the Boehner defeat, the embarrassment last night, really
leaves the president without someone with whom he can negotiate?

VIQUEIRA: Well...

SMERCONISH: In other words, who does the president turn to now?

VIQUEIRA: And that is a great question. As a matter of fact, we are told
that Harry Reid, the Democratic leader, of course, of the Senate, has been
at the White House huddled with the president during some time in the last
hour before the president is due to appear to us there in the Brady
Briefing Room.

What we saw today was recrimination in the aftermath of what happened last
night, John Boehner coming out, said, We passed a bill way back in the
summer that extends rates permanently for everyone. Obviously that`s a
non-starter. But he says Harry Reid should pick it up.

Harry Reid rises on the Senate floor today and says the House has to get
back to work. This silliness about plan B has to end. Mitch McConnell,
the Republican leader, says it`s all up to the president. So everybody
moving in different directions.

The Senate did pass a bill that set that threshold at $250,000. They
passed it back in August. It`s sitting over in the House right now. There
are procedural problems with it that can easily be gotten around. But that
would be the lone remaining viable vehicle.

But I don`t think, really, that there`s a chance for any of that to happen
in the House of Representatives, Michael. I think the most likely scenario
at this point is the inertia scenario. Go past January 1st, rates rise on
everyone, and then it`s a much easier vote for these Republicans in the
House of Representatives...

SMERCONISH: Mike, is your...

VIQUEIRA: ... to cut taxes for 98 percent of Americans.

SMERCONISH: Is your sense of it that the votes that could not be corralled
last night by Speaker Boehner -- those conservatives, those Tea Party
Republicans -- would, indeed, rather go off the fiscal cliff than
compromise with this president of the United States?

VIQUEIRA: You know, this is the acrimony that`s going back and forth.
Republicans -- it`s almost an article of faith now, Michael, I`ve said for
weeks now that they believe the president wants to go off the cliff. Many
Democrats up here believe the Republicans want to go off the cliff. I`ve
got to tell you, I don`t think anybody wants to go off the cliff.

Obviously, the president is in a politically advantageous point here.
There is no question about it. But again, I think the most likely solution
here to bar an economic cataclysm -- I mean, another recession is what
we`re talking about, raising taxes to the tune of $2,200 for next year for
the average American family of four, if there is no resolution.

There`s a lot at stake here. There`s a long list of taxes that are going
to go up, kick back in, the AMT, estate tax, you can go on down the line,
the payroll tax, and of course, income taxes, the Bush-era income taxes. I
think both men want to have a deal simply because -- this might even sound
naive at this point, Michael -- because it`s the best thing for the
country.

SMERCONISH: Understood. Hey, Mike, stay with us, please, if you will.

South Carolina Republican congressman Mick Mulvaney is here with me
tonight. He`s one of many Republicans who planned to vote no on plan B.

Welcome, Congressman. Thank you for being here. My question that I just
put to Mike Viqueira is better put to you. Would you rather go off that
fiscal cliff than compromise with this president of the United States?

REP. MICK MULVANEY (R), SOUTH CAROLINA: Well, no. I mean, I`m not adverse
(SIC) to compromising with this president. I mean, we`ve tried to do
things together for the last two years. But when he`s offering us things
that are so outrageous that he knows we can`t take them, I don`t know how
you can compromise it.

I tell people, if you`re trying to sell your house and I knock on your
front door and say, I`d like to buy your house for $1, you`d slam the door
in my face because I`m not a serious negotiator. And I -- we`ve just not
seen anything out of the president yet that is even close to being able to
be the basis for a discussion, at least within the House.

SMERCONISH: What was your objection to the so-called plan B by your own
speaker? Is it that, in your view, it raised taxes?

MULVANEY: No. In fact, actually, if you look at the text of the document,
it actually doesn`t raise taxes. So that`s not actually my objection.

My objection was it didn`t fix the problem. It didn`t cut any spending.
It really didn`t fix any of our longer-term issues. It divided us between
us and them, and that`s not something I want to participate in as a
Republican. I wanted something that treats everybody fairly. This was a
flawed piece of legislation at many levels.

SMERCONISH: So that I understand, your objection, then, is not -- you`re
not staking out -- drawing a line in the sand, staking out territory that
says, I won`t vote for something that does raise taxes.

MULVANEY: Yes, I`m not telling anybody what I will or will not vote for.
What I have told people all day today and for several months is that I have
voted for things up here that I never thought I would vote for. I voted to
raise the debt ceiling. I did it as part of an overall package called
"Cut, cap and balance" that solved the problem. Bring us something that
actually solves the problem and we will look at it.

SMERCONISH: Congressman, have you wounded Speaker Boehner`s ability to
negotiate a deal that would be palatable to you by the way in which he was
embarrassed last night?

MULVANEY: No. And I think that`s one of the greatest non-stories of
today. I`ve been getting that question all day long today. But keep in
mind, the opposition to this bill last night was not the conservative wing
of the party. The opposition was broad-based. There were moderates who
were against it. There were some of the most conservative members of our
body who were for plan B last night.

SMERCONISH: But see, we don`t -- but we don`t know that because no vote
was taken. And consequently, the word has been on Capitol Hill that it was
the most conservative of Republicans who were, to use a word,
"intransigent" with this speaker. They wouldn`t even go along with their
own leader.

MULVANEY: Sure. It`s -- it`s simply not true. There were conservatives
who were against it. There were moderates who were against it. There were
conservatives and moderates who were for it. Simply ask the question -- I
don`t think anybody`s asked it today. We`ve always assumed, especially
when you talk to folks across the aisle, the Democrats, as you do all day
long, that it`s the conservative wing of the party. And I can assure you
nothing was further from the truth yesterday.

SMERCONISH: What are you hoping to hear from the president momentarily?

MULVANEY: Something we can work with, something close, something that`s
not demagoguery and politics, something that`s got some detail to it. I`ve
been reading some of the Internet articles about what he might be saying.
So let`s see what he comes back with.

SMERCONISH: Thank you, Congressman Mick Mulvaney. We appreciate your time
here -- Congressman Mulvaney from South Carolina.

Robert Costa is the Washington editor for "National Review" and a
contributor to CNBC`s "KUDLOW REPORT," and MSNBC political analyst David
Corn is the Washington bureau chief for "Mother Jones" magazine.

Bob, you really had the backstory on what went on last night. I`m
surprised to hear the congressman say, Hey, it wasn`t just the most
conservative members of the Republican House. Does that comport with your
understanding?

ROBERT COSTA, "NATIONAL REVIEW," CNBC CONTRIBUTOR: Sure, there were a few
moderates who were against plan B, but...

SMERCONISH: A few?

COSTA: A few. But this was really driven by the conservatives in the
House, who went to John Boehner at 7:00 o`clock last night and they said,
We cannot support this at all.

Remember, there are 241 Republicans in the House. Boehner could risk
having 24 defections. I hear the number was between 30, 50, maybe even 60
defectors.

So Boehner pulled the entire thing from the floor, went ahead (ph) of the
conference, said a prayer about serenity, then pulled the entire thing from
the floor and sent everybody home.

SMERCONISH: What was the basic objection? Because the congressman just
said it wasn`t a perception that they would be participating in a raising
of taxes.

COSTA: It really comes down to politics, Michael. You`ve been in politics
for decades. You know how it works. A lot of them really said, I can`t go
home and sell a tax rate increase, even if it`s just a tax rate increase
for millionaires. I risk a primary if I sign onto that kind of
legislation.

SMERCONISH: But see, that`s my confusion because the congressman just said
it wasn`t a tax increase.

David Corn, is it really that the speaker loses credibility with his own
folks when he negotiates in good faith with this president of the United
States? And I continue to say it this way because of the antipathy that so
many of them have exhibited toward the president.

DAVID CORN, "MOTHER JONES," MSNBC POLITICAL ANALYST: You know, the clown
show got clownier. I don`t know how else to put it.

(LAUGHTER)

CORN: I mean, this is -- we went through this a year-and-a-half ago in the
summer of the debt ceiling, and again and again and again -- and this is
what I wrote about in my book, "Showdown" -- Boehner would try to negotiate
a deal with the president. The president`s men believed he was trying in
good faith, and I believe the president`s, you know, aides in that.

And yet he would go back to the caucus and he`d go back -- you know, and
Rush Limbaugh and "The Wall Street Journal" and others would be raising a
storm, and he would basically fib or misrepresent his to own caucus what
he`d been talking about with the White House.

And for the last few weeks, as I`ve been on this show with Chris and
others, I keep saying, Listen, the problem here isn`t John Boehner. The
problem is John Boehner is being held hostage by his own caucus. He`s not
able to cut a deal.

And it`s absurd that last night, the speaker of the House didn`t even know
his caucus well enough that he came close to putting a bill on the floor
that ended up not passing.

SMERCONISH: But it`s -- you know...

(CROSSTALK)

CORN: ... and he has to pull it. I mean, he should know days in
advance...

SMERCONISH: But David...

CORN: ... whether he has the support or not!

SMERCONISH: It`s even worse than that because the whole...

COSTA: It could be.

SMERCONISH: The whole thing was a bit of a charade to begin with, Bob
Costa, because this was...

CORN: Sure.

SMERCONISH: ... never going to get through the Senate, and if it did by
some miracle, it was never going to get the signature of the president.
The whole thing was politics.

COSTA: Of course it was all politics. Obama had $400,000 as his threshold
for tax rate increases. Boehner wanted the threshold to be a million. And
there was always a discussion behind the scenes that eventually, the final
deal with be somewhere between 400K and a million dollars.

This was a negotiating tactic by Boehner. But when his negotiating tactic
fails, Boehner`s entire hand in this negotiation collapses because now he
can`t -- as David said correctly, he can`t guarantee any part of his caucus
as a real person, as a real factor in this negotiation that will back the
speaker`s ideas.

SMERCONISH: David, can Harry Reid fill this void? Can he speak for the
House?

CORN: No, he can`t. I mean, this is the problem. Harry Reid and Mitch
McConnell and the president, I think, could cut a deal pretty damn quickly.
But it has to go through the House. Unless there`s a petition discharge
and the Democrats are able to get -- you know, what do they need, 18, 20
Republicans who are maybe a little more on the sane side who will vote for
-- you know, to bring a bill up. But the speaker controls the floor of the
House and you can`t bring anything up without really his say-so.

So what`s he going to do? Is Boehner going to -- you know, even if
something passes the House, even if Mitch McConnell is -- you know, is OK
with this, how can he bring up a vote on a bill and risk his speakership?

This is what happened with the payroll tax cut a year ago, and he
eventually bent, but I`m not sure he`s going to be able to do this in time
before the deadline.

(CROSSTALK)

SMERCONISH: Let me go back to Mike Viqueira and ask him to respond to some
of what he`s hearing from his perch on Capitol Hill. Mike, weigh in on
this.

VIQUEIRA: Well, again, you know, I just don`t see where they go, Michael.
There`s no place to go. I mean, there`s nothing that`s going to pass in
the House of Representatives that raises taxes an iota.

And what Speaker Boehner was trying to do with his plan B is what leaders -
- Democrats, Republicans -- always do in the House of Representatives. You
can`t beat something with nothing. So Speaker Boehner was trying to vote,
demonstrate to the White House and his own conference how difficult this
was going to be for him to come off a million dollars or raise taxes at
all.

He certainly succeed in that regard.

CORN: Yes!

(LAUGHTER)

VIQUEIRA: But he also wanted to send something to the Senate that could
have been possibly a basis of negotiation. They call it ping-pong around
here. You know, this goes to the Senate, the Senate says, Well, this is
what we think. This comes to -- it`s just -- the problem is it`s very late
in the game for all this, obviously.

And so the only logical and realistic explanation I come to -- and I know
I`m harping on it -- is inertia. Go over the cliff, come back, make the
cuts retroactive to January 1st.

COSTA: I disagree real slightly with that, Michael, because what I`m
hearing from Capitol Hill Republicans is that they don`t want to go over
the cliff yet. There`s still some time next week to perhaps bring a bill
to the floor, as David Corn said, that would maybe need 110 Republican
votes, 110 Democratic votes, that has a $500,000 threshold, a $600,000
threshold, and that maybe has a chance next week to get a bipartisan...

(CROSSTALK)

SMERCONISH: Hey, Bob Costa, isn`t one takeaway from this that there`s no
way a grand bargain is struck? Those who`ve been waiting for something,
Simpson-Bowles-like, it`s just not in the cards, that there`s going to be a
Band-Aid applied?

VIQUEIRA: Oh, not now.

COSTA: Michael, real quick, yes and no. There`s no chance of a grand
bargain before December 31st. But I still think behind the scenes, Boehner
and Obama are continuing to have a talk about some kind of tax reform and
entitlement reform next year. But right now, it`s all about rates. The
discussion is about rates.

CORN: But also remember, Michael, that after this, we still have to deal
with the debt ceiling. And the Republicans -- you know, the caucus there
is showing that they`re just not willing to compromise or be reasonable,
depending on your perspective.

And if this is how they`re playing it now, one can only wonder what they`ll
do when they have the debt ceiling to hold hostage once again. You know,
they are driving this because they`re not letting Boehner negotiate as an
adult should be able to.

And so if he can`t control his own caucus, I don`t think you can have a
grand bargain, at the end of the day, because he can`t trust them to
support whatever he`s willing to trade away to the president to get
something in return.

SMERCONISH: Hey, Bob Costa, let me ask you this question. What`s the net-
net politically for he or she in middle America who`s half paying
attention? They`re doing Christmas shopping. They`re getting ready for
the holidays. And they know that there was some blowup on Capitol Hill
last night.

Now do you think this plays? I mean, it can`t be playing well for brand
GOP. You`d acknowledge that, right?

COSTA: Oh, I think, Michael, I was outside of the whip`s office last
night, Kevin McCarthy`s office. A lot of moderate Republicans were coming
out of there after this conference meeting, and they were disappointed.

In my article at "National Review," they expressed their disappointment
because when they go home, they have to talk to their constituents who are
frustrated. (INAUDIBLE) deal isn`t being done. They`re frustrated that
their rates may go up.

Some yes, conservatives like Congressman Mulvaney and others blocked this
behind the scenes, but a lot of moderate Republicans, that part of that
Tuesday group of centrists -- they have to go home and have a lot of tough
questions at these town hall meetings.

SMERCONISH: Bob, you mentioned Congressman Mulvaney. I think I still have
him. Congressman, if you`re there -- better I should have asked the
question to you, sir. How does this play at home for you?

MULVANEY: I think it plays fine. I think the folks recognize the fact
that the president is the difficulty here. So I`m not having any
difficulty at all back home. (INAUDIBLE) folks automatically think South
Carolina is some right-wing extreme state. I`m the first Republican in my
district in 130 years. So this is a swing district, and I`m still getting
a lot of support from folks back home.

CORN: Well, listen...

SMERCONISH: I -- you know, I -- let me just say this to the congressman.
I like to regard myself as answering the telephone for a living because I
do 15 hours of live radio a week. What I hear from people all across the
country is, Can`t the adults work this out? Can`t compromise be a clean
word, not a dirty word? Get in a room and iron this out.

MULVANEY: Absolutely. But you`re making an assumption here that I don`t
think is fair, which is...

SMERCONISH: Tell me.

MULVANEY: ... you`re assuming that if what we had passed last night was
going to become law. That`s meaningless.

(CROSSTALK)

SMERCONISH: To the contrary, I used the word "charade" earlier. And I
said...

MULVANEY: OK.

SMERCONISH: ... what baffles me about the politics of this is that the
speaker would have expended all this capital on something that would never
have gotten out of the Senate to begin with, much less with the president.

CORN: Hey, Michael?

SMERCONISH: Yes?

CORN: Michael, let me just -- you know, I don`t want to take your job away
from you, but let me just ask the congressman while we have him. What
compromise would you accept here? The president won with 53 percent of the
vote, 52 percent. His approval rating`s at 56. He campaigned without a
doubt on raising taxes for people making over $250,000. So he`s come up
from that to $400,000, $500,000, whatever it`s going to be.

What compromise are you willing to make? Meaning, what would you agree to
that you wouldn`t otherwise want to do to make something happen?

MULVANEY: Sure. And I`m going to dodge your question just a little bit...

CORN: Well, there you go!

MULVANEY: ... and in all fairness -- no, no. Wait for a second.

CORN: OK.

MULVANEY: You`re not the other side of this negotiation. You can`t give
me what I want in this, so I`m not going to tell you what I will or won`t
do.

I will tell you this. I`ve already taken heat from my party for working
with Barney Frank on some items this year. I`m taking heart right now for
working with Keith Ellison. I think I`ve shown a track record of being
willing to work with the other side, if it fixes the problem.

That`s the key. I`m not going to compromise for the sake of political
charade, to put it in you guys` words. I am interested in fixing the
problem. Let`s get to that point, get beyond political rhetoric and get
beyond the demagoguery...

CORN: But one problem...

MULVANEY: ... and try and fix it.

CORN: But one problem is tax rates go up a week from now. That`s -- there
are a lot of problems here at once. There`s the question of spending,
there`s the question of entitlements, the debt ceiling. But one problem is
that tax rates go up in a week.

MULVANEY: I understand that.

CORN: What do you want to do about that?

MULVANEY: And I don`t want that anymore than anybody else, but I`m also
not willing to simply give away the farm so that that doesn`t happen. The
bill last night had no spending cuts. None. Zero. They tacked on another
bill on the calendar, but the actual bill that we voted on, this plan B
last night, not a single dollar in spending cuts. That`s a non-starter for
me and for a lot of folks in my caucus, and not just the conservatives.

SMERCONISH: Congressman, think more broadly than just your district, if
you would, sir.

MULVANEY: Sure.

SMERCONISH: What effect do you think this has on the brand for the
Republican Party generally?

MULVANEY: I think that remains to be seen. I get that question a lot. I
think there`s an argument to be made that if it passed last night, it hurt
the brand. There`s an argument (INAUDIBLE) if it failed last night, it
hurt the brand.

I happen to fall into the former category. I think that it`s important
that the public knows that the Republicans stand for everybody and that we
do not believe in raising tax rates. That`s important. That`s part of who
we are as Republicans.

I think if we give in just a little bit on that, we start to do -- we do
start to lose our brand. That said, if it`s done as part of something that
really fixes the problem, I think we actually come out looking better in
the end.

SMERCONISH: Robert Costa, paint the picture for me as to what went on last
night. You talked about the "serenity prayer" that was offered by Speaker
Boehner. What are you referring to?

COSTA: So John Boehner called a conference meeting to announce that this
thing is not going forward, he`s pulling it from the floor.

And as much as -- the congressman is right. Inside the Republican Party,
there is a battle over taxes, about taking a stand principally on their tax
position.

But the scene last night, Michael, was utter chaos. I was there in the
Capitol basement. So many members came out of this conference meeting
shocked, in just total shock because John Boehner -- they thought he had
the votes. He was personally whipping this vote on the House floor on
Wednesday. There was a hard whip all day Thursday.

And now for Boehner just to send everyone home, after they thought they
were going to take a stand on plan B, just was a surprise. And it shows
that the Republican Party right now, at least in the House of
Representatives, is having a real identity crisis because John Boehner`s
power -- it`s not necessarily in question. There`s no one challenging him
for the speakership. But at the same time, there`s a real question of
where can he go when it comes to whipping votes? What power does he really
have to corral his caucus?

SMERCONISH: Mike Viqueira, if you`re still with me...

VIQUEIRA: Yes.

SMERCONISH: ... talk to me about John Boehner`s future as we enter 2013
and the position of the speakership.

VIQUEIRA: Well, you know, the speakership isn`t what it used to be.

(LAUGHTER)

SMERCONISH: Apparently not.

VIQUEIRA: I got to tell you! You know, I was talking to a veteran member
of Congress up here, a Republican, and we were talking a little bit about,
you know, the leverage that a speaker might have.

You know, it used to be way back in the day, all the way back in the Sam
Rayburn day -- this may be apocryphal, but when a speaker wanted to talk to
an appropriations chair, the appropriations chair didn`t go to the
speaker`s suite. The speaker went to the appropriations chair suite.

Fast forward to the day before yesterday here in the Senate. A man was
offered the chairman of the Appropriations Committee, he passed it over,
Patrick Leahy. Another man was offered it, Tom Harkin. He passed it over.

They don`t have the leverage. They don`t have the swack (ph) that they
used to have here largely because or principally -- not necessarily largely
or principally, but to a certain degree, because this place is cleaned up
somewhat. There are no more earmarks. There are not $20 billion of
earmarks. You can`t say, I`m going to take that bridge away unless you
vote for this project.

We saw John Boehner play some hardball with some of the congressman`s
colleagues a couple of weeks ago, yanking them off the so-called "A"
committees, really much sought-after committees where they do have some
influence. But evidently, the speaker does not have that kind of swack
(ph) anymore. It`s hard to whip like it used to be.

I want to put a little bit of this in context. The national debt in this
country is $16 trillion. John Boehner and the speaker -- John Boehner and
the president are $4 billion -- $400 billion apart. That`s a 10-year
figure! I mean, this gets to the point where it`s almost ridiculous!

And now I think the Republicans are losing leverage, because if we do go
over the cliff, all the pressure is going to be on them. The president is
going to get the extension of the debt ceiling. The Republicans may not
get what they thought they were going to get in terms of entitlement reform
and curbing the growth of entitlement, modest though that may have been in
some people`s eyes, with those adjustments to the cost of living increases
in Social Security.

So I think it`s bad news all around for Republicans at this point. The
chips are certainly down here, Mike.

SMERCONISH: All right, gentlemen, if you wouldn`t mind staying right where
you were, we`re of course awaiting President Obama`s remarks concerning the
fiscal cliff.

Going to take a quick time-out and come back to HARDBALL.

(COMMERCIAL BREAK)

SMERCONISH: We`re back awaiting President Obama`s statement from the White
House on the fiscal cliff.

NBC`s Mike Viqueira is with us from Capitol Hill, as is U.S. Congressman
Mick Mulvaney, Republican of South Carolina. Also with us, Bob Costa of
"National Review" and David Corn of "Mother Jones" magazine.

Congressman, of what concern are the fluctuations in the market in this
whole process?

REP. MICK MULVANEY (R), SOUTH CAROLINA: Well, I`m not too worried about
the short-term fluctuations.

I think you saw the Dow was down today...

SMERCONISH: One-twenty-one.

MULVANEY: ... just under 1 percent, 120-odd points.

I think it`s been down more than 100 points five times in the last 30 days.
So, when the Dow is at 13000, 100 points is not that big a deal. And I`m
not too concerned about the short-term variations. I am concerned
obviously about the long-term effects on the economy. And I think that`s a
very real concern that people are right to have.

SMERCONISH: I asked the question because, as you will recall in the fall
of `08, there was that 775-point drop at a time when there was a vote
against the Bush bank bailout.

Robert Costa, of what extent do you think that`s a factor in all of this?
Are those with whom you speak on Capitol Hill concerned about the market
and its reaction?

COSTA: No.

I speak to some sources close to leadership earlier today, and they expect
when the House comes back next week and if the markets really start to
fluctuate, Boehner may not be able to get a majority of House Republicans
to sign onto a compromise bill with a different threshold, but if the
markets are fluctuating, maybe he can get 50 to 100 Republicans to sign
onto a compromise.

That`s why the market factor is important, because some Republicans may not
be able to go back home and say they voted against something, especially if
the markets are really going jittery.

MULVANEY: Well, if I can step in here -- and I apologize for going where
I`m not invited -- but what does that mean if the market is up next week?

COSTA: If the market is up next week, it`s not a factor and Boehner is
going to probably have a harder time getting a compromise.

(CROSSTALK)

MULVANEY: There you go.

(CROSSTALK)

COSTA: ... votes for a compromise.

DAVID CORN, MSNBC POLITICAL ANALYST: And, Michael, there`s something other
than...

SMERCONISH: Go ahead, David.

CORN: There`s something other than just the market.

The White House has been hearing a lot from Republican CEOs who are just
looking at what`s gone on in Washington and considering it just completely
nuts. This is no way to run the economy, one of the most important
economies in the world.

And they are blaming the Republicans more than the Democrats or the
president. And we`re going to see this, I think, even greater outcry maybe
become public if the Republicans yet again start playing with the debt
ceiling, which we can ask the congressman now, but I think that`s the next
-- I think there`s their plan C, D, E, or F.

SMERCONISH: Well, Congressman, I was making reference to I think some of
those poll numbers that David just brought up.

All of Congress suffers from low approval ratings, but I think when you
look at some of the data on who do you blame the most for what`s taking
place, the GOP takes a much harder hit than do the Democratic members of
the House.

MULVANEY: And we do. We saw that in the national election.

We have come to expect that. We have always struggled on the messaging or
at least in recent periods of time. It`s very difficult to compete with a
president of the other party, who is a very good communicator. It`s easy
to hate Congress because you only usually know one or two out of the 435
members. Everybody knows who is the president is.

So, we do have an uphill battle fight on messaging. There`s no question
about it, but does that mean that you vote differently? Does it mean that
you vote for something that you shouldn`t otherwise vote for, just so you
can go out and say, look, I -- I -- don`t blame me?

Keep in mind, even if we had voted for this last night, and it would have
failed, as everybody would have said, don`t you think we would be getting
blamed anyway?

COSTA: Right.

Michael I was outside the House conference last night. And I think
Congressman Mulvaney brings up a great point. A lot of Republicans walked
up to Speaker John Boehner and the whips, and they said, regardless of what
happens, Mr. Speaker, Mr. Leader, we`re going to get blamed anyway. So why
compromise on anything if we`re going to get blamed? I`m not going to vote
for this piece of legislation.

CORN: You know, at some point, too, you have got to have a Washington that
works. You just got to get around some of these issues.

And, listen, the president has put things on the table that people on the
left and Democrats don`t like, but I think they`re willing to swallow hard
and try to move ahead, because being stuck -- I don`t like the cliff
metaphor, but having these tax rates go up, having a problem with the debt
ceiling is very bad for the average worker out there and bad for incomes
across the board.

And if the Republicans just want to say, hey, our messaging stinks and
we`re just going to stick to principles and we`re not let our guys, our
leaders negotiate for us, well, then, eventually, the public will have to
do something about that.

(CROSSTALK)

SMERCONISH: Gentlemen, gentlemen, I have to -- I have to hold it right
there, if you don`t mind.

We`re going to bring you the presidential statement on the fiscal cliff
when it happens. But he`s had a very busy day. He picked John Kerry to
replace Hillary Clinton as secretary of state.

(CROSSTALK)

SMERCONISH: How will Kerry do, and who will take his place in the Senate?

This is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

SMERCONISH: Welcome back to HARDBALL.

It`s official. President Obama announced today that he would nominate
Senator John Kerry to replace Secretary of State Hillary Clinton. Let`s
watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I am very proud to announce
my choice for America`s next secretary of state, John Kerry.

In a sense, John`s entire life has prepared him for this role. As the son
of a Foreign Service officer, he has a deep respect for the men and women
of the State Department. Having served with valor in Vietnam, he
understands that we have a responsibility to use American power wisely,
especially our military power.

(END VIDEO CLIP)

SMERCONISH: So what does today`s announcement mean for the president`s
second term, and what does it mean for Kerry`s Senate seat?

Chris Cillizza is the managing editor of PostPolitics.com and an MSNBC
corrector. And Bryan Bender is a national security reporter for "The
Boston Globe."

President Obama and Senator Kerry, gentlemen, have shared a unique history
over the past eight years, something Obama talked about today.

(BEGIN VIDEO CLIP)

OBAMA: Of course, I also have to say thanks, because John invited a young
Illinois state senator to address the Democratic Convention in Boston.

I was proud to serve with him on the Foreign Relations Committee under the
tutelage of Joe Biden, and where we all became friends. But, of course,
nothing brings two people closer together than weeks of debate prep.

(LAUGHTER)

OBAMA: John, I`m looking forward to working with you, instead of debating
you.

(END VIDEO CLIP)

SMERCONISH: Bryan, I forgot about the role that Senator Kerry had played
with that now famous speech that was delivered by now-President Obama.
Where would he be without that speech to the DNC in Boston?

BRYAN BENDER, "THE BOSTON GLOBE": Well, it`s true.

As the president was pointing out, John Kerry has been one of his earliest
political supporters. Not only did he give him that slot in 2004, which
brought Barack Obama to national prominence, but ever since, he has been a
big supporter and was one of the earlier supporters in the Senate for
Obama`s campaign back in 2008.

SMERCONISH: Chris Cillizza, I have only got about a minute or so because
we`re anticipating the president`s arrival.

CHRIS CILLIZZA, MSNBC POLITICAL ANALYST: Sure.

SMERCONISH: But this nomination, do you expect any hiccups in the road?

CILLIZZA: I don`t.

You know, President Obama, in announcing the nomination that he had picked
John Kerry, Michael, said, "And I expect him to be smoothly confirmed."

Look, I would say one of the reasons John Kerry was picked, certainly not
the only one and probably not one of the top five, but is that he is a
current member of the Senate and he had people like Susan Collins, Bob
Corker, Republicans, saying this is a guy who could get picked and get
right through.

So, the president, given what happened with Susan Rice, the -- Chuck Hagel,
the hiccups that have gone with the Chuck Hagel -- the theory of the Chuck
Hagel nomination -- we don`t actually have a Chuck Hagel nomination yet --
I think he wanted to pick someone here for secretary of state that he knew
would be kind of a very quick confirmation. John Kerry certainly has every
look of that at the moment.

SMERCONISH: Bryan Bender, who is the odds-on favorite to fill the Kerry
seat, assuming he`s confirmed?

BENDER: Well, I mean, there`s going to be a placeholder that Governor
Patrick will name in an interim, four or five months until the special
election.

And Governor Patrick has said that that person will probably not be someone
who would likely run for the seat. But once the special election occurs in
the spring of next year, I mean, it`s anybody`s guess.

SMERCONISH: All bets are off.

BENDER: I think it`s going to be a free-for-all, Democrats and
Republicans.

I think there`s Scott Brown on the Republican side. There`s Governor --
former Governor William Weld who has been talked of somebody who could --
who would run.

SMERCONISH: And Ben -- Ben Affleck.

(LAUGHTER)

BENDER: Ben Affleck has come up. And I think the Democrats` will be, in
some ways, a divisive bloodbath of a primary.

SMERCONISH: Gentlemen, we`re anticipating the arrival of the president to
speak, of course, on the fiscal cliff, and so I`m probably going to have to
cut it short at this juncture and go to the president and hear what he has
to say.

In fact, we`re going to go to the White House right now in anticipation of
President Obama.

Mike Viqueira, I know you`re still with us. And here is the president of
the United States.

Let`s all listen.

OBAMA: Good afternoon, everybody.

Over the last few weeks, I have been working with leaders of both parties
on a proposal to get our deficit under control, avoid tax cuts -- or avoid
tax hikes on the middle class, and to make sure that we can spur jobs and
economic growth, a balanced proposal that cuts spending, but also asks the
wealthiest Americans to pay more, a proposal that will strengthen the
middle class over the long haul and grow our economy over the long haul.

During the course of these negotiations, I offered to compromise with
Republicans in Congress. I met them halfway on taxes, and I met them more
than halfway on spending.

In terms of actual dollar amounts, we`re not that far apart. As of today,
I am still ready and willing to get a comprehensive package done. I still
believe that reducing our deficit is the right thing to do for the long-
term health of our economy and the confidence of our businesses.

I remain committed to working towards that goal. Whether it happens all at
once or whether it happens in several different steps. But, in 10 days, we
face a deadline. In 10 days, under current law, tax rates are scheduled to
rise on most Americans.

And even though Democrats and Republicans are arguing about whether those
rates should go up for the wealthiest individuals, all of us, every single
one of us, agrees that tax rates shouldn`t go up for the other 98 percent
of Americans, which includes 97 percent of small businesses.

Every member of Congress believes that, every Democrat, every Republican.
So there is absolutely no reason, none, not to protect these Americans from
a tax hike. At the very least, let`s agree right now on what we already
agree on. Let`s get that done.

I just spoke to Speaker Boehner, and I also met with Senator Reid. In the
next few days, I have asked leaders of Congress to work towards a package
that prevents a tax hike on middle-class Americans, protects unemployment
insurance for two million Americans, and lays the groundwork for further
work on both growth and deficit reduction.

That`s an achievable goal. That can get done in 10 days. Once this
legislation is agreed to, I expect Democrats and Republicans to get back to
Washington and have it pass both chambers. And I will immediately sign
that legislation into law before January 1 of next year.

It`s that simple. Averting this middle-class tax hike is not a Democratic
responsibility or a Republican responsibility. With their votes, the
American people have determined that governing is a shared responsibility
between both parties.

In this Congress, laws can only pass with support from Democrats and
Republicans, and that means nobody gets 100 percent of what they want.
Everybody has got to give a little bit in a sensible way. We move forward
together, or we don`t move forward at all.

So, as we leave town for a few days to be with our families through the
holidays, I hope it gives everybody some perspective. Everybody can cool
off. Everybody can drink some eggnog, have some Christmas cookies, sing
some Christmas carols, enjoy the company of loved ones.

And then I would ask every member of Congress, while they`re back home, to
think about that. Think about the obligations we have to the people who
sent us here. Think about the hardship that so many Americans will endure
if Congress does nothing at all.

Just as our economy is really starting to recover, and we`re starting to
see optimistic signs, and we have seen actually some upside statistics from
a whole range of areas, including housing, now is not the time for more
self-inflicted wounds, certainly not those coming from Washington.

And there`s so much more work to be done in this country, on jobs and on
incomes, education, and energy. We`re a week away from one of the worst
tragedies in memory, so we have got work to do on gun safety, a host of
other issues.

These are all challenges that we can meet. They`re all challenges that we
have to meet if we want our kids to grow up in an America that`s full of
opportunity and possibility, as much opportunity and possibility as the
America that our parents and our grandparents left for us. But we`re only
going to be able to do it together. We`re going to have to find some
common ground.

And the challenge that we`ve got right now is that the American people are
a lot more sensible and a lot more thoughtful and much more willing to
compromise and give and sacrifice and act responsibly than their elected
representatives are. And that`s a problem. There`s a mismatch right now
between how everybody else is thinking about these problems -- Democrats
and Republicans -- outside of this town and how folks are operating here,
and we`ve just got to get that aligned. And we`ve only got 10 days to do
it.

So I hope that every member of Congress is thinking about that. Nobody can
get 100 percent of what they want, and this is not simply a contest between
parties in terms of who looks good and who doesn`t. There are real world
consequences to what we do here, and I want next year to be a year of
strong economic growth.

I want next year to be a year in which more jobs are created and more
businesses are started. And we`re making progress on all the challenges
that we have out there. Some of which, by the way, we don`t have as much
control over as we have in terms of just shaping a sensible budget.

This is something within our capacity to solve. It doesn`t take that much
work. We just have to do the right thing.

So, call me a hopeless optimist, but I actually still think we can get it
done. And with that I want to wish every American at merry Christmas and,
you know, because we didn`t get this done, I will see you next week.

All right. Thank you, guys.

MICHAEL SMERCONISH, GUEST HOST: President Obama saying let`s get the
middle class tax component done because there`s agreement on that. He also
said that he`s compromised. He said that he has met the Republicans
halfway on taxes. He said that he`s met the Republicans halfway on
spending.

Mike Viqueira is still with us from Capitol Hill.

Mike, any surprises in what you just heard from President Obama?

MIKE VIQUEIRA, NBC NEWS: I just don`t think that that`s going to be the
breakthrough that`s going to get us to avert this fiscal cliff. The
president is essentially talking about the same proposal that he had on the
table before, 98 percent of Americans getting a tax cut. That translates
to an income level of $250,000 -- obviously a nonstarter -- still putting
pressure on Republicans to come around, to come down off their figure.

I don`t see what the president has proposed there or what the president
spoke of in general terms anyway, and we assume he`s talking about the bill
that passed the Senate with that $250,000 level that has now languished in
the House for quite some time. Hard to see how this is going to break the
log jam, Michael.

SMERCONISH: Robert Costa, he`s still chatting with Speaker Boehner. I
took note of the fact that he said that he spoke not only with Senator Reid
but also with Speaker Boehner so he continues that negotiation process
despite last night`s wounding.

ROBERT COSTA, NATIONAL REVIEW: Michael, that`s the big thing to take away
from what the president just said. He could have said a lot of different
things, but the most important thing was that he just spoke with Speaker
Boehner. That means talks are still ongoing.

And he also mentioned he wants to come back next week and try to get
something done. Boehner said the same thing. He`s open to coming back
next week after Christmas. So, this means Reid, Obama, and Boehner, and
McConnell continue to chat. And I think next week, you`re going to see
some kind of compromise come back to Capitol Hill.

SMERCONISH: Chris Cillizza, the odd dynamic, you`ll correct me if I`m
wrong, is that the president needs John Boehner, does he not? Because --
but for Boehner, where does he go? With whom can he negotiate? Harry Reid
can`t speak for the House.

CHRIS CILLIZZA, MSNBC POLITICAL ANALYST: Right. I would say this -- I
think he needs John Boehner because if they do want to try this $250,000
and above bill, they need the Republican leadership to be willing to put it
on the floor for a vote, number one, and that includes John Boehner.

And then the question, Michael, is -- can they peel off 20, 25, 30
Republicans? It`s the exact opposite math, but can they take a handful of
Republicans, add them to the majority of Democrats? And is Boehner OK with
passing something like this with what would certainly be if it was the
$250,000 or above, a minority of the majority?

So, you know, a lot of it does still lay in Boehner`s hands though I think
his leverage is significantly reduced. Does he bring the bill up and is he
OK with a minority of the majority. That is not something we`ve seen in
the modern era of the Republican Party, that they are OK with bills going
through like that. We shall see.

SMERCONISH: Gentlemen, thank you for your patience. Mike Viqueira, Robert
Costa, and Chris Cillizza.

Coming up: the other big story today -- the NRA speaks one week after the
Connecticut school massacre. That`s ahead.

This is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

SMERCONISH: It`s been a week since the massacre in Newtown. Today, the
National Rifle Association waded into the debate over gun control with a
strange press conference. The group`s CEO, Wayne LaPierre, blames laws
banning guns at school for the violence. His position: more guns.

The NRA called for putting an armed guard at every school in the country.

(BEGIN VIDEO CLIP)

WAYNE LAPIERRE, NATIONAL RIFLE ASSOC.: The only way to stop a monster from
killing our kids is to be personally involved and invested in a plan of
absolute protection. The only thing that stops a bad guy with a gun is a
good guy with a gun.

I call on Congress today to act immediately to appropriate whatever is
necessary to have put armed police officers in every single school in this
nation, and to do it now.

(END VIDEO CLIP)

SMERCONISH: (AUDIO GAP) exactly to train thousands of armed guards, and
what would it accomplish? Would one armed person really have been able to
stop last week`s killer with his semiautomatic rifle and body armor?

Steve Siebold is the author of the book "Sex, Politics and Religion", and
MSNBC political analyst David Corn is the Washington bureau chief for
"Mother Jones" magazine.

Mr. Siebold, are you comfortable with what the NRA put forward today?

STEVE SIEBOLD, AUTHOR, "SEX, POLITICS AND RELIGION": Absolutely. I mean,
this is the only answer. More guns equals less crime.

I mean, if we don`t arm our teachers, if we don`t have guards at the
schools, this is going to happen again. There`s no question about it,
whether we do this or not. But at least the teachers have a fighting
chance. At least they have a fighting chance to save those little kids.

I mean, this is something we have to do, unfortunately. This is all we
have to do.

SMERCONISH: I don`t want to read into this. Do I understand your view
that it would be a requirement for teachers? What if I`m a teacher who
doesn`t want to carry a firearm? I`m not proficient and I want nothing to
do with guns.

SIEBOLD: I don`t want my kid in your class then. My kid is in danger.

SMERCONISH: Wow. Really?

SIEBOLD: Because of what`s happening. I`ll send my kid to another school
where the teacher is willing.

SMERCONISH: So, to a young person in school today who is pursuing a career
on education, maybe going to college with that desire, because they want to
school young people, they would also need to be trained and comfortable
with the idea of carrying a weapon?

SIEBOLD: Unfortunately, this is the world we live in.

SMERCONISH: But that logic --

(CROSSTALK)

SMERCONISH: One last thing, David.

By that logic, then why not arm the students as well?

SIEBOLD: Because the students are children. You don`t arm children.

SMERCONISH: An 18-year-old, a high school? An 18-year-old high school
senior? I mean, by your logic, they, too, should all be carrying weapons?
And the lunch ladies and the bus driver.

SIEBOLD: No, but I think the college kids should be armed. Absolutely.
They have the right to protect themselves.

The government cannot protect us. They can`t be everywhere all of the
time. The government -- this is delusional thinking.

SMERCONISH: David Corn, it`s such a complicated subject. And I hate to
play into the sound byte mentality that this week has become.

DAVID CORN, MOTHER JONES: Yes.

SMERCONISH: We`re 5 percent of the world`s population and we`ve got 50
percent of the guns.

CORN: You know, I think today, the NRA planted a flag on planet bizarro.
I hate to use a sound bite like that. But we have more guns in this
country and we have more gun violence in this country than any other
Western industrialized nation. And they don`t see a link?

And, in fact, what they then say is we need more guns, like our guest just
said. That`s the world we live in.

No, we live in a world where everyone around the country has mentally
deranged people, they have violent video games, violent movies, violent
music, as we do. But, yet, they don`t have the number of guns we have.
And strikingly, oddly enough, they don`t have the same gun violence that we
do.

I don`t know why that point escapes Wayne LaPierre and our guest on the
show tonight.

SMERCONISH: Mr. Siebold, I feel naive. I really thought that today,
because the NRA said they were bringing forth contributions, I expected the
NRA to embrace universal background checks. I thought the NRA might
actually get out in front of a ban on military-style assault weapons. I
don`t think today`s message played so well -- which is what David is saying
-- in Middle America.

SIEBOLD: The problem is not the NRA. The problem is we`re having the
wrong conversation, as usual in this country. We should be talking about
mental illness. Not guns. Normal people don`t shoot people. They don`t
go massacre a bunch of children.

SMERCONSIH: But what I`m trying to say is that the mentally ill have free
access to our weapons. "The New York Times" today had a front page story
about the Swiss cheese nature of the FBI`s recordkeeping pertaining to
those who have mental illness or those who shouldn`t carry a weapon because
of their criminal illness.

CORN: Listen, Michael.

SMERCONISH: Real quick.

CORN: The NRA, this is what Wayne LaPierre today said. He talked about
mental illness. They are opposed to background checks on people who go to
gun shows, who sell guns to each other privately, not to gun stores. So,
it doesn`t matter.

SMERCONISH: I know. I was shocked about that.

CORN: This is blatant hypocrisy.

SMERCONISH: I wish we had more time.

Thank you, David Corn.

CORN: Sure thing.

SMERCONISH: Thank you, Steve Siebold.

When we return, allow me to finish with "Zero Dark Thirty", that great new
movie about getting bin Laden and the difference one person can make.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

SMERCONISH: Last night, here in New York City, I saw the movie "Zero Dark
Thirty." The film gets its wide release on January 11.

I thought it lived up to the hype. The Kathryn Bigelow-directed movie
about the takedown of bin Laden was spellbinding, especially at the
conclusion, even though you know how it ends.

But much of the advance attention has been focused on how the movie begins,
with the graphic depiction of an al Qaeda prisoner being harshly
interrogated. Earlier this week, three U.S. senators took issue with that
sequence. They feared that American moviegoers will get a distorted
impression of the role of torture in our getting bin Laden.

The first half hour of the movie depicts the interrogation of a detainee
called "Amar". Although the filmmakers say he`s a composite figure, he
appears based on Mohammed al-Qahtani, who was harshly interrogated although
not waterboarded.

At Gitmo, Qahtani was one individual who identified bin Laden`s courier, a
key break in the hunt for bin Laden. When we eventually learned the
courier`s real name and found him, we found bin Laden.

In real life, one month before September 11, Qahtani was denied admission
to the United States when an astute INS agent named Jose Melendez-Perez
wouldn`t allow him to enter the Orlando airport. So, Qahtani returned to
the Middle East and he was later apprehended fighting with bin Laden at
Tora Bora.

The 9/11 Commissioner later determined that he was to have been the 20th
hijacker. Part of the evidence, 9/11 ring leader Mohammed Atta awaited him
at the Orlando airport.

So, for me, "Zero Dark Thirty" is a reminder of the power of one person.
One week ago today, we saw the power of one individual to do horrible
things.

Well, this was the opposite. If he Jose Melendez-Perez had allowed Qahtani
into the United States, he would have been aboard flight 93. Arguably, his
added muscle could have kept the passengers at bay for the 20 more minutes
the flight needed to reach its target, the U.S. Capitol. That would have
been catastrophic. And if Qahtani died on flight 93, he would not have
been captured at Tora Bora and we would not have learned the name of bin
Laden`s courier from him.

Jose Melendez-Perez, he`s a little like the Jimmy Stewart character in a
movie getting played a lot this week, "It`s a Wonderful Life," the Frank
Capra classic. Remember George Bailey saved his brother, Harry, from
drowning when he fell through the ice as a boy. And as a result Harry was
there in World War II to save the men of a transport, winning the Medal of
Honor.

Well, it happens in real life, too. One person can make a difference.

That`s HARDBALL for now. Thanks for being with us.

"POLITICS NATION" with Al Sharpton starts right now.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
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