updated 12/28/2012 10:39:59 AM ET 2012-12-28T15:39:59

THE RACHEL MADDOW SHOW
December 27, 2012

Guest: Debbie Stabenow

MICHAEL ERIC DYSON, MSNBC POLITICAL ANALYST: THE RACHEL MADDOW SHOW
starts right now. Ezra Klein is filling in for Rachel tonight, not Django.

Good evening, Ezra.

EZRA KLEIN, GUEST HOST: Good evening, Michael. Thank you very much.

DYSON: All right, sir.

KLEIN: And thank you to you at home for sticking around for the next
hour. Rachel has a well-deserved night off.

But today, on the Senate, there was a rare sighting on the Senate
floor, especially around this time of year. Right now, the Senate is
usually a bit of a desolate place, but today at exactly 2:34 p.m. Eastern
Standard Time, there was something big afoot. At 2:34 this afternoon, in
from the wings of the chamber walked the president of the Senate, Vice
President Joe Biden.

Joe Biden does not often serve in his capacity as president of the
Senate. But today was different. Today, Joe Biden had an incredibly
important job to fulfill.

(BEGIN VIDEO CLIP)

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Do you solemnly
swear to support and defend the Constitution of the United States against
all enemies, foreign and domestic, that you will bear true faith and
allegiance to the same, that you take this obligation freely without any
mental reservation or purpose of evasion, and that you will well and
faithfully discharge the duties of the office upon which you`re about to
enter, so help you God?

SEN. BRIAN SCHATZ (D), HAWAII: I do.

BIDEN: Congratulations, Senator.

SCHATZ: Thank you.

BIDEN: And welcome.

(APPLAUSE)

(END VIDEO CLIP)

HAYES: Congratulations, Senator.

Today, the United States Senate got a brand new member. Democratic --
Democrat Brian Schatz of Hawaii. Senator Schatz was appointed by Hawaii`s
governor last night to fill the vacant seat of Senator Daniel Inouye, who
passed away a week ago.

Brian Schatz got on Air Force One late last night. He touched down in
Washington early this morning. And he was a senator by this afternoon.
That is a big day.

So, Senator Schatz, welcome to Washington. Welcome to the U.S.
Senate. There is a lot to catch up on.

First of all, many of your new colleagues, most of the people you`re
about to join, they won their elections back in November. You of course
did not. So it is possible that between November and now, like a normal
human being, you were not paying all that much attention to what Washington
has been up to.

Most years, that wouldn`t matter. It`s the end of the year. Things
have slowed down. We`re waiting for a new Congress to come in. Usually,
you would have time to get your bearings to figure out where the bathrooms
are.

That is not going to be the case this year. Not with the fiscal
cliff.

Luckily for you, we here at THE RACHEL MADDOW SHOW, we have been
paying attention. We have had absolutely no other choice, unfortunately.
And we are here to help you and everyone else trying to figure out how we
got to this point we are in.

Right after that election, the day after the election, in fact, your
new colleagues got to work immediately on the cliff. The day after the
election, Republican House Speaker John Boehner put out this stirring call
to action.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Mr. President, this
is your moment. We`re ready to be led. Not as Democrats or Republicans
but as Americans.

We want you to lead. Not as a liberal or conservative but as
president of the United States of America.

(END VIDEO CLIP)

KLEIN: Mr. President, we are ready to be led. Just show us the plan.

That was encouraging. That seemed like we were going to have a deal,
no problem.

Obama won the election. He`ll hand them a plan. He`ll make some
small changes. That`s how Congress works, of course. Pass it and we`ll be
done. We`ll go home for Christmas.

Not so much.

President Obama did hand them a plan as Treasury Secretary Tim
Geithner made a special trip all the way to John Boehner`s office on
Capitol Hill. He delivered the plan to Speaker Boehner, a plan pretty much
identical to the one President Obama just won the election on. You might
have thought that would have been leading, the problem would have been
solved.

Not so much.

(BEGIN VIDEO CLIP)

BOEHNER: Flabbergasted. I looked at him, you can`t be serious. I`ve
just never seen anything like it.

(END VIDEO CLIP)

KLEIN: So when you said you wanted to be led, you just wanted a plan,
that was a joke? So the White House agreed, then, no more leading, that
was not what their partners in the House of Representatives wanted.

Instead, White House and Boehner entered into intense lengthy
negotiations. And by the end of them they seemed really close to a deal.
The White House had agreed to cut their tax ask by about $400 billion, to
increase their spending cuts by another $400 billion and only ask for about
half as much stimulus.

They moved towards Boehner by more than a trillion dollars. That was
a lot of concessions from the team that had just won the election big. And
they made them because they thought Boehner was ready to say yes, the
fiscal cliff would be averted, we`d have a good Christmas and happy
economic fun times for the economy would be right around the corner.

They were wrong.

(BEGIN VIDEO CLIP)

CHUCK TODD, NBC NEWS: We are nowhere when it comes to the fiscal
cliff talks. Let me tell you what`s going to happen today. Speaker John
Boehner, the Republican speaker, is going to try to pass what he calls his
Plan B, which would just simply address tax rates for those making a
million dollars or more and that`s it.

(END VIDEO CLIP)

KLEIN: John Boehner walked away from the Obama administration`s third
offer, a giant, giant compromise. So he didn`t like it when they led. He
didn`t like the negotiating. He decided instead to chart his own course
called Plan B.

Plan B was supposed to show President Obama that Republicans had their
own solution and instead of bothering with his offer, they would just go
ahead and pass their own plan without him. That was the idea, anyway.

(BEGIN VIDEO CLIP)

MADDOW: There is breaking news to report tonight out of Washington,
strange breaking news out of Washington. Within the last hour, Republican
House Speaker John Boehner appears to have completely lost control of his
own caucus. Just about an hour ago, John Boehner was forced to pull his
own plan off the floor because it turns out he did not have the votes from
his own side to pass it. He didn`t have enough Republican votes to pass
the Republican plan.

(END VIDEO CLIP)

KLEIN: Senator Schatz, this is now your life. I know that Speaker
Boehner is in the other chamber, but this is what you need to know right
now about Boehner and his colleagues.

John Boehner is somebody who just a week ago was essentially
humiliated by his own caucus. When he stood before them on that night, on
the night Plan B went down, and begged them to please follow him. And then
to go before them when they didn`t, he actually read the Serenity Prayer
aloud. He read it to his own members.

He said to all of his members, "Lord, grant me the serenity to accept
the things I cannot change." That is not the prayer you say when you know
what you`re going to do next. It is not the prayer you say when you even
have a plan. It is a prayer that you say when all of your other plans
have, well, gone to hell.

John Boehner walked out of that conference with his members, and he
released a statement that essentially said, "I tried but I`m out." He
wrote, quote, "The Senate must now act."

Senator Schatz, that is where you and your chamber come in.

Now, at times in the last couple years this has actually worked. When
the house can`t come to an agreement with the president, the Democratic
leader in the Senate, harry Reid, and the Republican leader Mitch McConnell
have come together and they have saved the day. They did it again and
again.

It happened in 2010, when Mitch McConnell actually worked with Joe
Biden to extend the Bush tax cuts and they got a bunch of stimulus passed.
It happened in 2011 when Reid and McConnell were key in resolving the debt
ceiling fight. And people thought maybe it could happen again this time.

What`s different now is that Mitch McConnell is up for re-election.
And it is -- it is weird to say this aloud, what I`m about to tell you. I
have never even thought about how weird it is to say until tonight`s
broadcast. But the person Mitch McConnell has in his head right now, the
person he`s maybe a bit afraid of, is Ashley Judd. Yes. That Ashley Judd.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Don`t cry. Don`t cry. You`re going to be fine.

ASHLEY JUDD: OK.

(END VIDEO CLIP)

KLEIN: Mitch McConnell`s up for re-election potentially against
Ashley Judd. She might be running against him. And she`s polling well.
They`re only about four points apart.

And so, he doesn`t want any trouble. He certainly does not want a
conservative primary challenge that will weaken him before the Judd
juggernaut.

So he`s decided to not really take any part in these negotiations
right now. Instead he came out and said, "It is the president`s job" --
this is a quote -- "It is the president`s job to find a solution that can
pass Congress. He`s the only one who can do it. This isn`t John Boehner`s
problem to solve."

Seriously. That is what he said. He said don`t blame us, we`re just
the speaker of the House of Representatives and the minority leader of the
U.S. Senate, and the guys who aren`t allowing the president to pass his
plan. But you know, we`ve got nothing to do with this.

You know, Congress comes first in the Constitution. Tax bills -- and
this is going to fundamentally be a tax bill when we pass it -- they have
to begin in the House of Representatives. They can`t originate in the
White House. The president can`t write legislation or pass itself.

The Founders would have been shocked to hear congressional leaders
talking this way. But put that aside. McConnell basically said to Reid,
I`m not helping on this one. I`m out.

And how did Harry Reid respond? This way.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: Speaker Boehner should call
members of the house back to Washington today. He shouldn`t have let them
go, in fact. They`re not here. They are not here.

John Boehner seems to care more about keeping his speakership than
about keeping the nation on firm financial footing.

(END VIDEO CLIP)

KLEIN: Right. So that`s pretty much where we are now. Boehner`s
out, McConnell`s out. Reid says it`s up to Boehner. White House can`t get
Boehner to talk to them.

It`s kind of a -- or at least really negotiated with them -- it`s a
kind of mess, Senator Schatz. And it is now part of your party.

So what is the next move? There is late news tonight that President
Obama will convene a meeting of congressional leaders at the White House
tomorrow afternoon to discuss the current impasse.

And to give you a spirit of the compromise and sense of goodwill
towards men in which Republican House Speaker John Boehner is approaching
this meeting, here is a statement that we were e-mailed tonight from his
press secretary Brendan Buck.

Quote, "Tomorrow, Speaker Boehner will attend a meeting with
congressional leaders at the White House, where he will continue to stress
that the House has already passed legislation to avert the entire fiscal
cliff and now the Senate must act."

So that`s helpful.

Senator Schatz, I know you probably just checked into the Marriott
Capitol Hill or something, but I don`t know, you got any ideas?

Joining us is someone who I hope will have some ideas, Democratic
Senator Debbie Stabenow of Michigan and member of the Senate Finance and
Budget Committees.

Senator Stabenow, thank you for being with us tonight.

SEN. DEBBIE STABENOW (D), MICHIGAN: Absolutely, Ezra. And I wanted
to thank you for what is a very good summary of where we are. And it is
the most frustrating thing I`ve ever gone through in my entire life, I
think.

KLEIN: I appreciate that. And covering it, what has been striking to
me is the level of not just substantive disagreement on things like tax and
spending, but the procedural breakdown. Every procedural effort that gets
begun to solve this, either negotiations or the House Plan B or maybe Reid
and McConnell negotiations, it is dissolving very, very quickly.

So what comes now? What is actually the process by which we can move
forward?

STABENOW: Well, Ezra, first of all, we have to be able to govern. We
have to have an adult conversation, getting people in the room who actually
want to solve this problem.

And I think it`s very important to step back and see the fact that we
have already -- there are three parts of this deficit reduction stool.
We`ve already in the last two years passed $1.6 trillion in spending cuts.
We have passed over $700 billion in savings in Medicare through reforms
like cutting back on overpayments to insurance companies.

The one piece of this puzzle that we`ve not been able to get any
support for is making sure that the wealthiest among us help solve this
problem by being willing to pay a little bit more to be part of the
solution. And so, we have sent a bill to the House back in July,
bipartisan bill that says what -- I mean, everybody says they don`t want
middle-class families to have their taxes go up, well, fine. Why don`t we
start with something we can agree on, which is that? And just pass that.
Why doesn`t the House just pass that?

But as we know, the speaker couldn`t even pass his own plan to say
that up to a million dollars was exempt from tax cuts. So what they`re
doing is holding middle-class families hostage right now, trying to find
some maneuver where the wealthiest people continue to get extra tax cuts
that we just can`t afford.

So I`m not sure what`s next. I can tell you the Senate`s here. We`re
in session. We had votes tonight. The president`s here.

I`m the eternal optimist. There are certainly things we can do
including pass the farm bill that we passed last June that has $24 billion
in savings by cutting subsidies for wealthy farmers.

So there`s a lot of things that we can do, but it`s going to take the
speaker deciding he wants to work across the aisle to get it done.

KLEIN: But can the speaker work across the aisle? One thing that has
been very -- I think an important theme of the last couple years but
particularly the last month or two is whether or not Boehner has the
influence in his own conference to pass these bills, whether or not he is
actually a negotiating partner who can be negotiated with.

And certainly before January 3rd, when he comes up for re-election as
speaker, do you think that anything can actually happen before then, or do
you think some of this is about Boehner trying to wait until after that
election is done and at least he is entrenched for another two years?

STABENOW: Well, the prevailing thought now is that the speaker won`t
do something until after his election vote on January 3rd. Could he? Yes.

In fact, he could take at least half of his caucus or more, combine
them with at least half the Democrats or more, and actually govern.

And frankly, as -- people in Michigan are telling me, my family and
friends, over Christmas, is that they really want us just to sit down and
work together and get something done. And when we`re talking about an
average of $2,200 in increased taxes potentially on a middle-class family,
you know, I have one woman say that`s four months` groceries for her kids.

So, you know, people here may think this is some kind of chess game.
This is serious business. It`s serious for the economy. It`s serious for
families.

And you know, it`s pretty hard to see this thing go round and round
and round like it is.

KLEIN: Senator Debbie Stabenow of Michigan, thank you very much for
your time tonight.

STABENOW: You`re welcome.

KLEIN: So maybe the super dangerous mess in Washington is the fault
of both sides. That`s what people say. I mean, there are plenty of people
who say that in public all the time.

Except that it is not. And we can prove it to you. That bit of
business is coming up.

(COMMERCIAL BREAK)

KLEIN: Have you ever been to Hobby Lobby? If you`re in the market
for fake flowers or beads or yarn, you may find yourself in a Hobby Lobby.

Now, me, I`m not so good at the crafting. I mean, this is my
handwriting. I can barely use a pen, much less actually fold anything or
use scissors. You don`t want me around scissors.

But many Americans do know their way around a hot glue gun, as
evidenced by the existence of 525 of these Hobby Lobby stores spread all
across the country.

The Hobby Lobby chain was founded by a guy named David Green. He`s
still the CEO and worth $4.5 billion, which is a lot.

According to the store`s statement of purpose, however, Mr. Green`s
main goal in founding his crafting empire was not to sell scrapbooks or
construction paper or even to make billions of dollars. It was to honor
the Lord and operate the company in a manner consistent with biblical
principles.

Those principles included refusing to provide insurance coverage for
emergency contraception to his more than 13,000 employees. Under the
terms, however, of the Affordable Care Act, which is now the law of the
land, beginning on January 1st, Mr. Green has to provide that coverage. He
does not have a choice.

So he sued. Quoting Mr. Green, "We simply cannot abandon our
religious beliefs to comply with this mandate."

Supreme Court Justice Sonia Sotomayor has weighed on the case
yesterday. Justice Sotomayor declined Hobby Lobby`s request to deny
emergency contraception coverage to its employees. She said, essentially,
they failed to prove their case.

A lower court had already ruled against Hobby Lobby by pointing out
that while churches and other institutions do not have to provide birth
control if doing so violates their beliefs a for-profit arts and crafts
store, no matter how religious the founder, is not a church or religious
organization. So, no, you can`t tell your employees what kind of
contraception they may get through their insurance.

So that happened. It is another legal victory for the Affordable Care
Act at the Supreme Court. It didn`t get as much attention as the last time
the court ruled on Obamacare, but it`s a big deal. It`s one more thing the
bill does not have to worry about.

We have talked about the Affordable Care Act for so long, it seems
almost theoretical, like a dragon, and when we talk about it it`s almost
always conditional. Would it pass? Would it survive the Supreme Court?
Would it be repealed?

And partially, that has been an organized and orchestrated Republican
strategy to fill the country with doubt about whether or not the bill is
actually a real thing. But now the bill is actually really happening.
Parts of it are going into effect as we speak.

2014 is the really big year for the Affordable Care Act. That is the
year when it really begins insuring millions and millions of Americans.
But a lot of important parts of it are going into effect in 2013, this
year, this coming year.

My "Washington Post" colleague Sarah Kliff put together a really handy
list over at Wonkblog, about how Obamacare is going to change health care
in this country starting in just a few days.

Number one is, starting in January, families making more than $250,000
a year are going to pay significantly higher taxes. That new revenue is
going to add up to more than $200 billion in the next decade to finance
Obamacare. It`s a fact about the law that`s often missed, even as we`re
arguing about raising taxes on rich peel.

Obamacare does raise taxes on rich people to pay for health insurance
for poor people. So, that -- that is fact number one.

Number two, as you are ringing in the New Year, think about the fact
that health care for the poor will actually be improving this year. There
are more than 50 million people on Medicaid. Medicaid is the main program
used to give health care to the poor and to the children in this country.

Medicaid is super cheap. It is way, way cheaper than private
insurance or Medicare. And in part it is so cheap because it pays doctors
a lot less than those programs do. That means a lot of doctors,
particularly primary care doctors, don`t want to participate in Medicaid or
they can`t afford to. So a lot of folks on Medicaid have trouble actually
getting care.

Doctors who accept Medicaid coverage are going to see a 73 -- primary
care doctors I should say -- a 73 percent raise in 2013. Which means those
folks will have more access to more doctors.

So we`re not just expanding health care for the poor in 2014.
Starting in 2013, we`re making it better health care. That is fact number
two.

Number three, your insurance plan will no longer be an impenetrable
document filled with legalese. It will probably look more like this.
Still words on a page. You`ve got to read something, but not that many of
them.

Straightforward, easier to navigate, and thus harder for your insurer
to fool you about what is actually covered. That is change number three.

And starting in October of 2013, the online health insurance markets
at the core of the bill, they will open up for business. Any American will
go able to go online and compare plans, maybe even read reviews and buy
health insurance. It`s going to be like Amazon.com for health care.

So, happy New Year. 2013, the year of the Affordable Care Act becomes
actual, real reality.

(COMMERCIAL BREAK)

KLEIN: Once upon a time, there was a lot of the world to explore.
Now, not so much. We`ve been pretty much everywhere on earth, up almost
all the mountains. Although nobody has made it to the summit of Canada`s
Mount Saskatchewan yet.

Filmmaker James Cameron this year made a solo dive seven miles down to
the bottom of the Mariana Trench.

We`ve had a guy parachute from the stratosphere, 24 miles up.

And so, now, we are at the point where we`re having to go back to what
were once the big landmarks and do them again but in harder ways.

It`s not enough to go to the South Pole before. That`s been done.
Norway got there first. Heck, going to the South Pole, it`s so easy these
days the prime minister of Norway has done it. And there were microphones
there when he did.

Not enough to cross Antarctica. That`s been done, too, a number of
times. It`s not even enough to cross it on foot.

So, the next big adventure at the end of the earth, to cross
Antarctica in winter. And the expedition that is going to do it set out
earlier this month from England. But wait, you say, it`s winter here.
Then right now, it`s summer in Antarctica.

And you`re right. But don`t call shenanigans yet. The expedition is
going to take a bit of time to get to Antarctica. Then the explorers have
to do some prep work to set up. And then they will head out on foot
followed by tractors across the vast iciness that is Antarctica in what
will be pretty much total darkness for months, enduring temperatures at 94
below zero, 94 below zero.

This is the guy who is leading the expedition. He is kind of an
amazing guy. The Guinness book of world records calls him the world`s
greatest living explorer. He`s a member of the British aristocracy, the
third baronet of Banbury. You can look him up in your copy of Debrett`s
Peerage. I mean, we looked him up in our copy. You got one right?

His full name: Sir Ranulph Twisleton-Wykeham-Fiennes, OBE. Sir
Ranulph was once considered to play the role of James Bond before the role
went to Roger Moore. He circumnavigated the globe the hard way, from pole
to pole. He ran seven marathons over seven days in six continents only
missing Antarctica because of bad weather. Of course he`d already crossed
Antarctica by foot when he missed it that time.

He has survived a literal heart attack on the slope of Mount Everest.
And he once had such a bad case of frostbite he amputated the ends of his
own fingers with a micro saw.

That is the rather bad-ass dude who is setting out to make what he is
dubbing the coldest journey. Now, Mr. Twisleton-Wykeham-Fiennes, that is
an amazing name, is also the third cousin of Ralph Fiennes, the actor.
Now, don`t get, fine, Ralph Twisleton-Wykeham-Fiennes is a great actor. He
played the heck out of Voldemort, which is not easy.

But as far as I can tell, Ralph Twisleton-Wykeham-Fiennes has never
had to put his hand in a vise so he can cut off his own fingers. And that
-- that I have decided is a standard by which all Twisleton-Wykeham-Fiennes
will be judged from here on out.

So good luck and Godspeed to you, Sir Ranulph the finest of the
Twisleton clan.

That story, I love it. I love it because it includes two of my
favorite things, celebrity gossip and crazy feats of awesome human
endurance. What it doesn`t include is my most favorite thing, charts.

But this show does. We have the very best charts of the whole year,
including Paul Krugman`s favorite chart -- coming up later.

(COMMERCIAL BREAK)

KLEIN: We joked a bit on last night`s show about Starbucks` plan to
solve the fiscal cliff by writing the words "come together" on people`s
peppermint mochas and their other cups of Joe.

Tonight I want to take this more seriously because I admire this
effort. CEOs and coffee drinkers alike should want to engage in politics.
They should be angry at what they see happening. They should be trying to
work out ways to make things work a bit better.

But this ideology of "come togetherism" that animates the effort, it`s
very common, and it`s not just wrong. It`s actually I think part of the
problem.

The idea that the problems in Washington would be solved if the two
sides would just, quote, "come together," it`s actually I think at this
point one of the reasons nothing in Washington ever seems to get solved and
the two sides never seem to come together. It`s counterproductive.

And to see why I think we need to get specific. Here are three facts
about the budget debate we`ve been having over the last couple of years
that say a lot about what it would mean for Washington to come together.

Fact number one: Simpson-Bowles, a bipartisan debt reduction plan that
people hold up as the very platonic ideal of coming together, Simpson-
Bowles is by any reasonable accounting far to the left of anything the
White House has ever proposed. It`s got $2.6 trillion in tax increases,
$2.6 trillion. More than twice as much as what the White House is
currently asking for. It`s got many, many more defense cuts than the
administration has ever even considered.

Republicans hate it, Simpson-Bowles, the come together plan. Paul
Ryan, the big deficit guy, or so he says, he was on the Simpson-Bowles
commission, and he voted against it, as did every other House Republican on
the commission.

The White House saw no reason to embrace something that raised taxes
sky high and cut defense spending and would never pass.

So the White House brought out something that was frankly to the right
of Simpson-Bowles. Their budget was to its right and they thought it had a
better chance of passing. They thought it was a compromise.

But the House Republicans did not respond the same way. When they
brought out the Ryan budget, which was their budget alternative, they
didn`t compromise. They went way to the right. There was no compromise in
it at all. That is fact number one.

OK. Number two, in 2010 Republicans won the midterm election. 2011,
the White House agreed to a deal that was all spending cuts. It`s called
the Budget Control Act. It is a law right now.

And it cuts spending by $1.5 trillion over the next decade. Except
for an increase in Pell Grants funding, a small bone, the bill is all cuts,
no taxes. And Democrats agree to that. They agreed. That is fact number
two.

Fact number three: at this point, even after winning the most recent
election, the White House has moved much farther toward Boehner than
Boehner has moved to the White House. From their first offer in November
to the last one the White House has dropped what they want on taxes by $400
billion, raised their proposed spending cuts by the same amount and lowered
their demand on stimulus by about another $250 billion. And they`ve
stopped asking end the debt ceiling forever entirely.

Boehner has increased his offer on taxes by about $150 billion,
dropped his spending cuts by $330 billion, and has never offered
significant stimulus or a major concession on the debt ceiling.

So, in every category, since Obama won the election, he has moved
further towards Boehner than Boehner moved towards him. And yet, it`s
Boehner who walked away from the talks with his Plan B, who failed to pass
it and said it`s the Senate`s problem now.

Democrats won the election. They got more votes at presidential
level, at the Senate level and at the House level. Boehner is speaker
today because of the way the districts are drawn. But his arguments did
not win. And yet he`s not really moved.

I don`t think you can look at the last three years and say the White
House has not tried to come together with Republicans.

I also don`t think you can look at the last three years and say the
Republicans have tried to come together with the White House. And so here
is what is supposed to happen. The American people who overwhelmingly say
they want compromise, who, in fact, say they want a plan similar to what
the White House is offering, a plan that raises taxes on the rich and cuts
spending, they`re supposed to punish the Republicans for not compromising.
And arguably they did that this year. Democrats won the election.

But what`s weird is at the elite level and the elite level, for better
or worse, matters in politics. The elites get through to politicians in
between elections. At the elite level, you`ve got folks in the media,
powerful CEOs, people who run interest folks, and a lot of these folks,
they want to keep up good relations on both sides of the aisle, and so they
find it safer to blame both sides for not coming together than to blame one
side for not allowing any coming together.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The battle over how to avoid going over the fiscal
cliff ramped up today as both sides were long on rhetoric and threats but
short on actual movement.

STEPHEN MOORE, WSJ: I think both sides deserve some blame here.

UNIDENTIFIED MLALE: Chris, I`m not certain there`s not politics on
both sides.

DICK HARPOOTLIAN, SOUTH CAROLINA DNC CHAIRMAN: Again, I thinks
there`s intransigence on both sides.

UNIDENTIFIED MALE: With all respect, it seems like both sides seem to
be we`re waiting for them, we`re waiting for, this we`re waiting for that.
But the fact is, nothing ever gets done.

(END VIDEO CLIP)

KLEIN: Blaming both sides instead of pointing fingers when pointing
fingers is warranted breaks the system. It hurts the mechanism, the
fundamental mechanism of accountability. It protects Republicans or
anybody who doesn`t want to compromise.

They can be intransigent, and they won`t feel the full consequence of
their position. They can refuse to take good deals. And while they`ll get
blames for that so will the other side. The Democrats will get about half
the blame.

D.C. is not equivalent right now. The two sides are not the same in
their willingness to come together. And those of us who want to see these
problems solved, who want to see everyone come together, who want to see
compromise get struck, we don`t just need to talk about how politicians
should work together. We need to actually point our fingers at the people
breaking it apart.

"Washington Post" columnist E.J. Dionne and also senior fellow at the
Brookings Institution joins me to talk a little bit more about this.

E.J., it is good to see you, sir.

E.J. DIONNE, WASHINGTON POST: It`s good to come together with you
against false balance.

KLEIN: See? We come together.


I actually want to ask you something, E.J., about the business
community on this. You`ve had this big group of CEOs, Fix the Debt, which
Schultz is a part of. And I`ve been surprised that early on, it seemed
they were going to exert a lot of influence and they`ve not actually seemed
that powerful and certainly not that powerful in moving the Republican
Party.

Why do you think that is?

DIONNE: You know, I think that the business community never acts as a
unified bloc. There are lots of pieces of it.

Secondly, the business community over the last 20, 25 years has moved
to the right of where the business community used to be. In some ways you
can see that in the political views of George Romney versus the political
views of Mitt Romney.

And third, I think that in the Republican House Conference, John
Boehner is far more worried about 35 to 70 of his most right-wing members
for now anyway, especially going up to the vote on January 3rd for speaker
than he is about the business community.

But I also think this false balance is part of it, that the business
community, like some in the media, seem to think you have to pretend to be
equidistant from the parties even though the parties themselves are not at
all equidistant from the center or not at all as inclined to compromise,
one as opposed to the other. As you showed, President Obama has given a
lot more ground, sometimes to the consternation of his own party, than the
Republicans have.

KLEIN: When you -- when I watch the sort of political strategy of a
group like Fix the Debt or just many folks in general, many in the media,
the animating underlying impulse seems to be a belief that what will lead
to compromise is kind of a spirit of cooperation, everyone being nice to
each other. And so when people stop being nice, they get upset.

And I kind of wonder, I`ve begun to real wonder in Washington whether
or not that is right. Because what seems to happen is you get that spirit
of cooperation and negotiations and then they break apart as the outside
interests come in. It seems at this point possible, at least in terms of
the White House`s strategy, that they would be more effective at getting
compromise by being somewhat less cooperative with Republicans, by using
more of an outside game, bringing more pressure to bear, instead of
negotiating just kind of pressuring the Republicans until presumably they
might break, at least if the White House is on the side of public opinion.

DIONNE: Well, you`ve already seen a little of that from the election.
After the blowup of 2011, where we almost wrecked the country`s credit over
the original debt ceiling fight, the president said, OK, they`re not
willing to agree to anything, I`m going to have a big public fight about
this.

And even flawed as it was, at least Plan B acknowledged that it was
time to raise taxes. So by going on the offense, the president actually
changed the terms of debate. The problem is that in the House, there are
still enough Republicans to block the party as a whole from saying all
right, we`ll agree to some tax increases.

And my view is that there is an easy way out, which would be -- not
easy for John Boehner, but it`s structurally easy. Let the house work its
will. You could easily put together a coalition of Democrats and
Republicans who want to govern around something like what President Obama
put on the table.

But that is not allowed to come to a vote, and the Republicans are
still scared of their right wing even though this election showed them that
they can`t keep moving to the right and expect to win.

KLEIN: E.J., you`re always balanced and you`re never false. Thank
you for being here.

DIONNE: Bless you. Good to be with you.

KLEIN: Not only can I explain this whole year using lines and grids,
I cannot wait to do it. A 2012 graphic geek-out deluxe Paul Krugman
approved, coming up.

(COMMERCIAL BREAK)

KLEIN: Imagine that in the past couple of months there had been mass
defections in the U.S. government. Imagine the speaker of the House
denounced the president and defected, fleeing the U.S. for, say, Canada and
taking with him a couple of people from the president`s cabinet and high-
ranking generals.

The spokesman for the State Department, she defects too, and not only
does she apparently denounce her loyalty to the Obama administration and
the whole American government, she does so after promising the world that
the president would never, ever use chemical weapons on his own people.
She says he won`t do that. And then she disappears.

Then a prominent attorney general and the chairman of the Joints
Chiefs, they denounce the government too and they flee. They leave the
United States.

And now, imagine these are just a few of the more than 70 high-level
defections from President Obama`s government.

That is obviously not happening here. It is what is happening in
Syria. That is what is happening to Bashar al Assad -- dramatic high-level
defections that show no signs of slowing down while a civil war rages on.

More and more, it seems people in the regime do not believe the
government will win, and so they are abandoning it. Assad`s chief of
military police, his defection enforcer, this week was almost poetic.
Before defecting, his job was to stop other people from defecting. His
department was literally tasked with shoring up the loyalty of the armed
forces.

And he didn`t just easily and casually walk out of the country --
according to opposition figures, who talked to the "New York Times" -- he
planned his escape for weeks and it, quote, "ended with a four-hour sprint
by motorcycle to the Turkish border, driving through woods and on muddy
roads."

The Syrian spokesperson, the one who said publicly that the Assad
regime would not use chemical weapons on his people, he supposedly left
weeks ago, and now, no one seems to know where he even is. "The Guardian"
reports he might be in the United States working with intelligence
officials. Something the State Department denies.

Meanwhile, an opposition activist makes public this conversation he
reportedly had with a guy over Twitter overt summer. In it, the spokesman
says he`s sympathetic to the opposition. And yet today, he`s still
missing.

What is happening in Syria right now is chaotic on every level, in the
streets and in the government, and it is deadly. More than 40,000 people
have been killed, according to human rights groups.

When you have that much chaos and that much destruction and so many
possible branching outcomes with this many lives at stake, you turn to an
expert. And we have one.

Joining us now from Cairo is Ayman Mohyeldin, foreign correspondent
for NBC News.

Ayman, thank you. It`s great to see you tonight.

AYMAN MOHYELDIN, NBC NEWS FOREIGN CORRESPONDENT: Thanks, Ezra.

KLEIN: Give me your broader take for a minute. Where are we on the
scale of regime collapse?

MOHYELDIN: Wow, that`s a very tough question. I think by anyone`s
estimates, including intelligence analysis and even opposition activists,
it`s very difficult to gauge that.

Those who are fighting on the ground will tell you that in the last
few weeks there have been significant gains and many people have used the
expression "This is the beginning of the end," not the end but the
beginning of the end. How long that lasts for depends on all kinds of
variables. But the term is being used more frequently among opposition
activists and those players here in the region.

KLEIN: Are these defections, are they going to be replaced? Is the
Assad regime at a point where it can -- I`m sorry, replenish itself?

MOHYELDIN: Well, there is no doubt that over the course of the last
several months, in terms of high level defection, every time there is a
defection, the government is quick to fill that gap. And, in fact,
President Assad has addressed this issue in many interviews and actually in
many statements that he`s given. He says that it kind of withers down the
hard-core loyalists in the regime, those that are in power, those that
leave. He always says openly they have the right to leave.

But people see it more to the complete shock to the morale of the
regime, when such high level people defect, including the prime minister,
the former prime minister, former military general and others, it`s more of
a psychological blow as well as a tactical blow to the regime and its
ability to carry out its daily functions. And that`s why the Syrian
opposition continually calls for these defections.

There is no doubt that the defections themselves have had a tremendous
impact on the circle of President Bashar al-Assad. Russia is signaling
that it would accept a transitional government in Syria. Is that a
significant turning point here? How do you read that development?

MOHYELDIN: Well, you know, the Russian position over the course of
the last several months has slowly shifted a little bit. Now, when you
look at it in details, you can clearly see from the time of the Geneva
meeting that took place a short while ago, in early December, and until
now, the Russian government says there has been no change in its position.
But they are willing to accept a transitional government.

But the term that they constantly refer to is that it is up to the
Syrian people to decide. It is not up to the West. It`s not up to the
United Nations or the U.S. to decide what kind of transition takes place.
They emphasize it must be the Syrian people.

But many inside Syria and in the region interpret that as a softening
of the Russian position, that they don`t necessarily have to stay with
President Bashar al Assad. They see that as an opening that they would be
willing to have some kind of process that would call for his removal and
bringing about a new government.

And that is what we heard from the U.N. special envoy who once again
emphasized the Russia would accept the transitional process so long as it
is decided on by the Syrian people.

KLEIN: Ayman Mohyeldin, foreign correspondent for NBC News and live
in Cairo tonight, thank you very much for joining us.

One of the most beautiful words in the English language: graphs.
Sexy, sexy graphs, coming up.

(COMMERCIAL BREAK)

KLEIN: When I`m not sitting in for Rachel, I`m at "The Washington
Post" writing a blog called WonkBlog.com, with a bunch of very cool people
who want to talk all day about disruptions in the economy and factors
affecting health care costs and obscure laws that make a gallon of milk 8
bucks.

Each year, for the end of the year, we ask our fellow travelers in the
great wide wonkish-sphere to send in their favorite graph. We want the one
graph they thoughts was the most essential to understanding America in
2012.

North Dakota Senator Kent Conrad, the outgoing chairman of the Senate
Budget Committee, he sent a graph this year that would be particularly
useful on Capitol Hill right now. It shows the last five budget surpluses
we had when tax revenue was always near or above 20 percent of the overall
economy, about five points higher than it is now and a couple of points
higher than Republicans want.

And, yes, tax revenues right now, about the lowest we have seen in six
decades. No wonder we`re broke.

Note to Congress, you want to balance the budget, you need more taxes.

Sheila Bair, the former chair of the FDIC, sent a terrifying two-line
graph. You see the growing divide here between the rich and the poor when
it comes to the amount of debt that they have. The graph was all the way
back to the Reagan era. Red line shows the debt by the top richest 5
percent of Americans as a percentage of their income. That percentage has
never been high. And it`s falling now.

The blue line shows the line for the bottom 95 percent. Debt takes up
much more of their income and it`s taking up more all the time.

Sheila Bair says this kind of inequality in debt simply cannot hold.
Her chart ends in `07 when the economy collapse. The situation, she says,
has not really changed.

The great economist Paul Krugman graced us with a related and equally
terrifying one-line graph. That long folder, that is the share of the
national product that is going to workers rather than capitol, the CEOs and
investors and so forth.

This is what inequality looks like, someone is getting rich and
instead of workers, it`s the people who own stuff.

And remember when Mitt Romney said that almost half of all Americans,
they are free loaders?

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: There are 47 percent of the
people will vote for the president no matter what. All right, there are 47
percent who are with him, who are dependent upon government, who believe
that they are victims, who believe that the government has the
responsibility to care for them, who believe that they are entitled to
health care, to food, to housing, to you-name-it. That that`s an
entitlement. And the government should give it to them.

And they will vote for this president no matter what. And I mean, the
president starts off with 48, 49 -- he starts off with a huge number.
These are people who pay no income tax.

(END VIDEO CLIP)

KLEIN: Bob Greenstein, from the Center on Budget and Policy
Priorities, put that question into chart form. You can see here, other
folks who didn`t pay income taxes is 61 percent pay federal taxes. So,
they were working and they were paying federal taxes. The rest, 22
percent, were elderly, who presumably been allowed to retire. We do allow
that. They pay no federal income tax.

The final slice of people not paying the federal income tax, was sick
and disable or they were in school or they retired early or they were
unemployed. Not a whole ton of moochers here.

Speaking of Mitt Romney, something he found out this year --
demographics matter. It`s the lesson from (INAUDIBLE) emerging Democratic
majority and also from the chart he sent in, just population density from
10 people per square mile on the left, to 36,000 people per square mile on
the right. So, it`s country mice on the left, .big city mice on the right.

The red line shows support for Mitt Romney, strong where not many
people live, thin where they are a lot of voters. And the blue line
support for Obama who won big in the cities and thrust him to White House.
This graph is part of the story of the 2012 election and maybe the next
several elections.

While we`re on the topic, Princeton, of the election, Sam Wang, a
Princeton neuroscientist, who, like Nate Silver, had just an incredibly
accurate election forecasting model. He sent us a cartoon rather than a
chart. It`s from a brilliant (INAUDIBLE) for comic SKCD and who weighed in
on the furious attacks being launched at people like Wang and Silver who
are using data to predict the election.

Wang and Silver, of course, turned out to be right, prompting this
cartoon from Monroe. It says, quote, "Breaking, to surprise a pundit,
numbers continue to be the best system for determining which of two things
is larger." It`s good word to the wise.

At my blog WonkBlog.com, we posted these charts and a bunch of others
that are bit complicated for TV, but I`ll work your time. I`ll tweet a
link to them after the show.

That does it for tonight. We`ll see you again tomorrow night.

Now it is time for "THE LAST WORD WITH LAWRENCE O`DONNELL". Have a
good night.

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

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