updated 1/3/2013 5:10:36 PM ET 2013-01-03T22:10:36

THE ED SHOW with ED SCHULTZ
January 2, 2013

Guests: Debbie Wasserman Schultz, Rep. Jerrold Nadler, Sam Stein

ED SCHULTZ, HOST: Good evening, Americans. And welcome to THE ED
SHOW from New York.

John Boehner is getting hammered by Republicans for caving on tax
increases and walking away from hurricane Sandy relief. 2013 is starting
with a bang.

This is THE ED SHOW -- let`s get to work.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will sign a law that
raises taxes on the wealthiest 2 percent of Americans while preventing a
middle class tax hike.

SCHULTZ (voice-over): The president gets his deal. But with the debt
ceiling battle on the horizon, how long does the victory last?

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Save your power for the debt
ceiling fight.

SCHULTZ: DNC Chair Debbie Wasserman Schultz will tell me where the
Democrats go from here.

GROVER NORQUIST, ANTI-TAX LOBBYIST: He got his tax increase, but he
can`t claim Republican fingerprints on his tax increase.

SCHULTZ: Grover can`t handle the truth. But his pledge is dead. And
it`s the end of an era for conservatives.

Tonight, Karen Finney and Michael Steele on the Republican Party in
disarray.

The keynote speaker at the Republican Convention destroys the
Republican Congress.

GOV. CHRIS CHRISTIE (R), NEW JERSEY: There is only one group to
blame: the House majority and their speaker, John Boehner.

SCHULTZ: Congressman Jerry Nadler on the Republican disgrace over
Sandy relief funds.

And when should Hillary Clinton expect those apologies from FOX News?

SEAN HANNITY, FOX NEWS: Hillary has severe Benghazi allergy.

(END VIDEOTAPE)

SCHULTZ: Good to have you with us tonight, folks. Thanks for
watching.

It`s a New Year and a new deal. There is still a big fight ahead, but
2013 started with a major victory for the White House.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The motion is adopted. Without objection, a
motion to reconsider is laid on the table.

(END VIDEO CLIP)

SCHULTZ: With 257 votes in the House of Representatives, 85 of them
coming from Republicans, all to put a deal together to avoid the fiscal
cliff. And yes, it was passed. There was compromise on both sides, both
middle class Americans went back to work today knowing their current tax
rates are permanent. Financial markets, they were all about it. The Dow,
the NASDAQ, the S&P 500 all up big today.

Republican members of Congress know the results of November`s election
haven`t changed.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I looked at the policy of where we were going to
be if we didn`t pass it or where we would be if we did. And while it was
like eating a you-know-what sandwich to vote for this, to me, it was a rite
of passage to this corridor (ph).

(END VIDEO CLIP)

SCHULTZ: Meantime, House Democrats are taking time for a victory lap
of sorts.

(BEGIN VIDEO CLIP)

REP. STEVE ISRAEL (D), NEW YORK: At the end of the day, it was House
Democrats who injected some adult supervision, some pragmatism, a sense of
compromise and solutions. That`s what the country wants.

It was House Democrats who stopped us from going off this cliff.

(END VIDEO CLIP)

SCHULTZ: We even saw a Tea Party revolt end in failure. Far right
wingers in the House, the Republicans were resigned to their fate after
being told the compromise bill was going to go to the floor for a vote.

(BEGIN VIDEO CLIP)

REPORTER: Are you disappointed the way that this has happened?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It is what it is.

(END VIDEO CLIP)

SCHULTZ: President Obama and Vice President Biden negotiated this
deal with America`s middle class in mind.

They could have allowed the country to go over the cliff. But the
president was not willing to let struggling Americans face the consequences
of a New Year without a deal. Instead, this is what they achieved.

(BEGIN VIDEO CLIP)

OBAMA: Under this law, more than 98 percent of Americans and 97
percent of small businesses will not see their income taxes go up.
Millions of families will continue to receive tax credits to help raise
their kids and send them to college. Companies will continue to receive
tax credits for the research that they do, the investments they make, and
the clean energy jobs that they create. And 2 million Americans who are
out of work but out there looking, pounding the pavement every day are
going to continue to receive unemployment benefits as long as they`re
actively looking for a job.

(END VIDEO CLIP)

SCHULTZ: So who would argue with that deal?

I mean, in an era of unprecedented obstruction, filibusters galore,
President Obama, what has he done? He has gotten $620 billion in new
revenue and no spending cuts. He also got more than 150 Republicans to
vote for taxes to go up on the middle class.

No one is denying that there will be tough fights ahead. But the
president defined the terms of battle going forward.

(BEGIN VIDEO CLIP)

OBAMA: Cutting spending has to go hand in hand with further reforms
to our tax code so that the wealthiest corporations and individuals can`t
take advantage of loopholes and deductions that aren`t available to most
Americans.

(END VIDEO CLIP)

SCHULTZ: This is a message to Republican leadership. If they want
spending cuts, they have to cough up some more revenue.

One thing we do know, the president will not have John Boehner as a
negotiating partner anymore. The House speaker told his caucus that he
will no longer negotiate one-on-one with the president of the United
States.

Boehner isn`t making too many Democratic friends on the Hill either.
"Politico" reports Boehner told Harry Reid to go blank himself.

Part of the reason Boehner is so testy is a fracture in his own
party`s leadership. Republican leader Eric Cantor broke ranks with the
speaker when the deal came up for a vote. Boehner and House Budget
Chairman Paul Ryan voted for the bill, while Cantor and House Whip Kevin
McCarthy voted against it.

What does that tell you?

President Obama needs to move forward with plans to avoid the next
fiscal crisis: the debt ceiling. He is not worried about engaging with a
fractured GOP. The president is going right back to you, the American
people.

The White House getting after it. Put on their Web site, publishing
the facts sheet. What this tax deal is all about. The details were shared
on the president`s massive e-mail list.

The White House also released a video where the president explained
his strategy of tax cuts and deficit reduction.

(BEGIN VIDEO CLIP)

OBAMA: So, instead, we`re solving this problem in several steps.
Last year, we started reducing the deficit through $1 trillion in spending
cuts. And the agreement we reached this week will reduce the deficit even
more by asking the wealthiest 2 percent of Americans to pay higher taxes
for the first time in two decades. So that`s progress.

(END VIDEO CLIP)

SCHULTZ: President Obama handled this showdown much the same way he
handled other standoffs in his presidency. He knows that progress comes
step by step, not all at once. Here is one major step. Remember the Bush
tax cuts? They`re all gone. They expired on the last day of 2012. The
tax rates passed last night, these are now the Obama tax cuts.

The difference between the Obama tax cuts and the Bush tax cuts --
well, these are permanent. That means a lot.

President Obama and Democrats accomplished these rates by getting
Republicans to vote for tax increases on the wealthiest Americans for the
first time in 22 years. 1990 was the last time any Republicans joined with
Democrats to raise taxes.

The president could have gone off the cliff and got more of what he
wanted. Instead he delivered for the middle class, as promised on the
campaign trail.

The pressures on the middle class in this country are far greater
today than they were 10 years ago. Since 2001, the middle income tier has
shrunk by 5 percent. The net worth of middle class families is down 28
percent.

Hold it right there. Think about where have your health care costs
gone in the last 10 years? Gasoline 10 years ago was a buck 40 a gallon.
Where is it now? Well over $3. Would you like to have a buck 40 a gallon?

The economy has changed a lot. Whether there had been the Bush tax
cuts or not, this president would have been on the front lines saying we
need to give relief to the middle class, and that`s what this was all
about. The tax deal was struck with these folks in mind.

The 2012 election was about income inequality and tax fairness. We
got closer to achieving both things last night.

Get your cell phones out. I want to know what you think.

Tonight`s question: is the fiscal cliff deal a victory for the middle
class? Text A for yes, text B for no, to 622639. You can always go to our
blog at Ed.MSNBC.com. We`ll bring the results later on in the show.

Joining me tonight is Congresswoman Debbie Wasserman Schultz of
Florida, chairwoman of the Democratic National Committee.

Congresswoman, good to have you with us tonight. Congratulations.

REP. DEBBIE WASSERMAN SCHULTZ (D-FL), CHAIRWOMAN, DNC: Thanks for
having me. Thank you very much.

SCHULTZ: Well, I want to put for our viewers tonight in perspective
just how big 39.6 percent is, a little history to this. This was passed in
1993. And the deciding vote was done by a congressional member from the
Pennsylvania 13th district. Mezvinsky, Marjorie Margolis-Mezvinsky. She
served one term from `93-`95. It costs her her seat.

Now, it passed in the House by one vote. It was Al Gore who passed
the deciding vote in the Senate.

Well, last night, you got 257 votes to raise taxes and get it back to
39.6 percent. That`s how big a lift this was and what a big accomplishment
it was.

Now, Congresswoman, what`s the next step?

WASSERMAN SCHULTZ: It really can`t be understated how significant
this was. What this is, though, and it certainly a significant
accomplishment that we were able to make sure that the wealthiest Americans
pay a little bit more, pay their fair share. That`s what -- that`s what we
argued throughout the whole campaign was that everybody needs a fair shot,
a fair shake, and everybody has to pay their fair share.

What this bill does is it makes sure that we give a big gift-wrapped
package of certainty to the middle class. Not just because we made sure
that middle class taxes didn`t go up, but that we also made sure we
extended the American opportunity tax credit, which will allow more young
people the opportunity to go to college.

We extended the child tax credit, which makes sure that people can
have more money in their pocket when they have children and pay those
expenses.

We made sure that we permanently fixed the alternative minimum tax,
which was getting ready each year to nail a huge number of middle class
folks.

SCHULTZ: All good stuff.

WASSERMAN SCHULTZ: The tax was never intended to pay for.

And we extended unemployment benefits for 2 million people for another
year. That was a really, really big deal.

(CROSSTALK)

SCHULTZ: That`s without offsets.

WASSERMAN SCHULTZ: Yes.

SCHULTZ: That`s without offsets.

Now, you got to get more revenue.

WASSERMAN SCHULTZ: We do.

SCHULTZ: Where are you going to get it? Where are you going to go to
get more revenue?

WASSERMAN SCHULTZ: Well, we`ve got it as President Obama said last
night, we`ve got to go to the tax code. We`ve got to sit down. And any --
the next step of reform is in focusing on deficit reduction is going to
have to be balanced.

I mean, I`ve heard a lot of Republicans say all day today in
interviews that, OK, you know, now, we`re done with taxes. We`re done with
revenue, and we can focus on spending cuts.

The American people have made it very clear that they want a balanced
approach.

SCHULTZ: But are you saying that you`re not done with taxes?

WASSERMAN SCHULTZ: We are absolutely not done with making sure that
any deficit reduction has revenue and spending cuts. And we`ll also need
to look at entitlement reform. President Obama knows that and has proposed
in his grand bargain $4 trillion deal. Remember, he proposed another $360
billion in savings for entitlement programs, which we`ll have an
opportunity to look at as well.

SCHULTZ: But, Congresswoman, can you tell us tonight where you can go
to get revenue? I mean, I`m talking about -- are we talking about a
transaction tax on Wall Street, something like that?

WASSERMAN SCHULTZ: No. We have to take a look -- we`ve talked for a
long time about finally reforming the tax code. There are so many
loopholes in the tax code that really also skew towards the wealthiest
Americans that ultimately if we`re able the close those, we can make sure
that when we do enact important spending cuts, that all that pain is not
balanced on the backs of the middle class.

SCHULTZ: That`s not the tax reform the Republicans were looking for,
is it?

WASSERMAN SCHULTZ: Well, the Republicans have said -- look, Mitt
Romney himself campaigned on reforming the tax code. And a lot of my
Republican colleagues have said that we need to take a look at that on the
Senate and the House side.

But it just needs to be clear that just because we had, you know, an
increase in the tax rate for the top earners to 39.6 percent, that does not
mean --

SCHULTZ: Sure.

WASSERMAN SCHULTZ: -- that revenue is off the table for the future.

SCHULTZ: All right. Here is what the president said last night about
Medicare. It caught a lot of people`s attention. Here it is.

(BEGIN VIDEO CLIP)

OBAMA: I agree with Democrats and Republicans that the aging
population and the rising cost of health care makes Medicare the biggest
contributor to our deficit. I believe we`ve got to find ways to reform
that program without hurting seniors who depend on it to survive.

(END VIDEO CLIP)

SCHULTZ: That scares a lot of liberals in this country right now.
What do you mean by draw the line? Where do you draw the line on cuts to
the big three?

WASSERMAN SCHULTZ: Well, I think the president is absolutely right.
We do need to add savings to Medicare so that we can make sure we preserve
it for the long-term. We were able to do that with $760 billion in savings
in the Affordable Care Act. And that added eight years of solvency. And
the president, as I said, proposed $360 billion in savings in the $4
trillion grand bargain that he put on the table.

So we know there is more savings that can be, you know, wrung out of
Medicare, and we`re going to back and make sure we take a look at that.
And Democrats I think will support a lot of those savings. But we`re going
to do it so we make sure it we don`t do it at the expense of our seniors
and enact harmful cuts that would hurt them.

SCHULTZ: Congresswoman Debbie Wasserman Schultz with us tonight here
on THE ED SHOW -- thanks so much. It is a big victory for the Democrats
and the country.

Remember to answer tonight`s question there at the bottom of the
screen. Share your thoughts with us on Twitter @EdShow and on Facebook.
We want to know what you think.

Coming up, the next big fight is just around the corner. Does
President Obama still have leverage going into the debt ceiling battle?
Michael Steele and Karen Finney will join me for that discussion.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: House members from both sides of the aisle are outraged
after Speaker John Boehner holds up hurricane sandy relief. And New Jersey
Governor Chris Christie has some harsh words for House Republicans. We`ll
have all the reaction coming up.

And as students in Newtown prepare to return to class, President Obama
keeps the focus on gun legislation. Sam Stein of "The Huffington Post"
will join me for the latest on that.

And you can listen to my radio show on Sirius XM radio channel 127
Monday through Friday, noon to 3:00 p.m.

Share your thoughts on Facebook and on Twitter using #EdShow.

Good to be back with you. We`re coming right back.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Thanks for watching tonight.

We now know the House Republican Caucus can be divided against itself
and its leadership can be split right down the middle. Republicans are
reeling and conservatives are moaning.

(BEGIN VIDEO CLIP)

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Look, there are a lot of
conservatives in the caucus, Republican Caucus in the House, who hate the
bill, and for good reason. I mean, this is a complete surrender on
everything. So, I mean, it`s a complete rout by the Democrats. So it`s
understandable.

He has been using this, and I must say with great skill and ruthless
skill and success to fracture and basically shatter the Republican
opposition.

(END VIDEO CLIP)

SCHULTZ: You could come to the conclusion Grover Norquist is history,
even though he is doing his very best to explain away the vote.

(BEGIN VIDEO CLIP)

NORQUIST: What happened yesterday was that all the tax rates went up,
and then the Republicans and the Congress together took them down for some
people, not for everybody.

(END VIDEO CLIP)

SCHULTZ: Republicans in the House who supported the bill are saying
they can now focus on spending cuts, and only spending cuts.

Here is Dave Camp, Republican of Michigan.

(BEGIN VIDEO CLIP)

REP. DAVE CAMP (R), MICHIGAN: So this is a first step, permanent tax
policy that then sets the stage for comprehensive and fundamental tax
reform, and then addressing out-of-control spending.

(END VIDEO CLIP)

SCHULTZ: Republicans are eager to get their revenge by tying the
spending cuts to the debt ceiling debate as they did last year.

Here is Senator Pat Toomey of Pennsylvania.

(BEGIN VIDEO CLIP)

SEN. PAT TOOMEY (R), PENNSYLVANIA: We Republicans need to be willing
to tolerate a temporary partial government shutdown which is what that
could mean -- a temporary disruption because we have to furlough the
workers of the Department of Education or close down some national parks or
not cut the grass on the mall. You know, that`s not optimal. It`s
disruptive, but it`s a hell of a lot better than the path that we`re on.

(END VIDEO CLIP)

SCHULTZ: Senator Toomey wants to pretend only a government shutdown
would occur if the debt ceiling isn`t raised. It`s far worse, and
President Obama has vowed not let Republicans use this tactic again.

(BEGIN VIDEO CLIP)

OBAMA: While I will negotiate over many things, I will not have
another debate with this Congress over whether or not they should pay the
bills that they have already wracked up through the laws they already
passed.

(END VIDEO CLIP)

SCHULTZ: All right. So the line in the sand is drawn.

Let`s turn to Karen Finney, MSNBC political analyst and former DNC
communications director. And also with us tonight, Michael Steele, former
RNC chairman and an MSNBC contributor.

Great to have both of you with us.

Michael, you first. Going forward, I mean, the line in the sand is
set. But how is President Obama going to keep the budget cut negotiations
separate from any kind of debt ceiling vote? Your thoughts.

MICHAEL STEELE, MSNBC CONTRIBUTOR: That`s a very good question, Ed.
And I think that`s one of the challenges the president is actually going to
face. So, I appreciate his comment when he said, I will no longer
negotiate with this Congress.

He is right. This Congress is over. A new Congress comes in
tomorrow, augmented, mind you, with 10 new, you know, a majority of 10 in
the Senate for Democrats, an additional eight Democrat House members. So
there is a little bit more there for him to work with in that regard.

But I think it`s going to be very tough because at some point you`re
going to have to address the spending side.

Even the president himself, Ed, as you have talked about before, has
put some things on the table, on the spending side that have made your
stomach turn. That`s going to be a part of this conversation going
forward. And the Republicans, rightly or wrongly, right now, believe in
the heat of this battle that this approach of laying -- of tying this to
the deficit is discussions is going to work.

I don`t know. I think we need to be smart. I think we need to be
careful.

And we got to have a message, Ed, that really people understand and
they can get behind. If not, they`ll get jobbed again as they got jobbed
on this one.

(CROSSTALK)

SCHULTZ: Go ahead, Karen.

KAREN FINNEY, MSNBC POLITICAL ANALYST: You know, Michael, I mean, if
your party thinks that threatening to shut down the government is a good
strategy, then, you know what? Now we understand all the more why y`all
thought when you were looking at the numbers that Mitt Romney was going to
be president. I mean, come on!

Threatening to shut down the government, it`s not just about the grass
not being mowed on the national lawn. It was in the government during the
Clinton administration when the government was shutdown. And there was
real pain for real people when that happens. I do not think that that is a
smart strategy.

I also think that what Republicans continue to misunderstand is basic
math, and that is that the middle class in this country -- and you talk
about this all the time -- they`ve already been paying more than their fair
share.

SCHULTZ: Well, not only that.

FINNEY: So when we go back to this conversation, when we talk about
fairness, they are crazy to think that as, you know, Debbie Wasserman
Schultz pointed out, of course both sides of the equation have to be on the
table.

SCHULTZ: No one on the Democratic side is saying that shutting down
the government is the way to go, OK? And the president is not going to go
down that road.

FINNEY: Of course.

SCHULTZ: But, Michael, why would the Democrats -- or why would the
Republicans go down that road when they know if it did happen, it would
have a global effect?

STEELE: That`s my point, Ed. You know, I`m not taking issue with
what Karen just said. I mean, I agree with that. That`s why I`m saying.

If this is the strategy, then you better have a damn good plan B, C,
and D to go with it because --

SCHULTZ: OK.

FINNEY: Yes.

STEELE: -- the fact of the matter is this is not necessarily the
first card you want to play, I think, coming out of this particular issue.

SCHULTZ: All right. Here`s more from Grover Norquist, which I find
very interesting. Very humiliating day for him.

(BEGIN VIDEO CLIP)

NORQUIST: A fight for four years in how to rein in President Obama`s
overspending. The Republicans have three points. The president has none.

(END VIDEO CLIP)

SCHULTZ: Really? I find that interesting.

Does Grover Norquist have any credibility, Karen, left at this point?
I mean, is he a guy that can twist arms and threaten people with primaries
and still be effective the way he`s been in the past?

FINNEY: No. I mean, let`s be very clear what this little tour from
Grover Norquist is about. This is a cry for relevance. That is the only
thing we should be seeing in what he is saying. He is trying to prove that
he is still relevant.

Remember, three weeks ago he was singing a dramatically different
tune. Now, he`s got -- even as Andrea Mitchell pointed out, some kind of
Alice in Wonderland fantasyland about how voting to increase is really
voting to decrease. It just doesn`t hold water anymore.

And don`t forget, part of the power of Grover Norquist is his close
relationship with none other than Karl Rove. Karl rove has also been
crippled over the past year in the process. So, the two of them are not so
scary anymore.

SCHULTZ: What I found absent from his conversation today was 39.6
percent. Why wasn`t he saying this is going to be a job killer? Why
wasn`t he saying --

FINNEY: Right.

SCHULTZ: -- he can`t raise taxes on the job creators? I mean, it`s
like he`s got to find a new set of bullet points here. But --

STEELE: Well, I think some of that is true. And I think the reality
for a lot of Republicans and conservatives around the country is, how do we
now move forward from this particular situation? You`ve seen the
splitting, as you led into this segment with the split in the house among
the Republican leadership, not just the rank and file.

The grassroots as I`ve noticed today on the blogs and on twitter were
fired up on this. You know, this is McConnell`s tax increase. So you`ve
got this fracture right now. And the leadership has got to pull itself
together with a cogent coherent message about how we move forward. And I
think spending should be a big part of the discussion as we go into the
next two months because as we know, there is already some agreement on some
of those things we should be talking about on the spending side.

(CROSSTALK)

FINNEY: You know what, Michael? I think you have a more fundamental
problem in terms just an overall lack of vision from your party. It`s not
just about reshuffling the talking points and going back to all the things
that are bad about President Obama or bad about Democrats. That`s not
going to work as I think you have seen time and time again.

But there is no vision coming from the Republican Party.

STEELE: Right.

FINNEY: There are tactics coming from the Republican Party.

SCHULTZ: Well, their vision was to voucherize Medicare, and that
didn`t work. I mean --

FINNEY: That`s right.

SCHULTZ: -- the electoral results have not changed. I mean, this is
going to be very interesting. This conversation about leverage, I`m not so
sure that President Obama doesn`t have a whole lot of leverage left called
the American people.

Karen Finney, Michael Steele, great to have you with us tonight.
Thank you.

Republicans hit back at Speaker Boehner today after he stops a vote on
billions of dollars of disaster relief. We`ve got the details, next.

And then we`ll talk to Congressman Jerrold Nadler about what putting
off disaster relief means for House Republicans.

Stay tuned. We`re right back.

(COMMERCIAL BREAK)

SCHULTZ: And we are back.

Last night in the House, the fiscal cliff fight just ended. The show
was far from over. The next order of business a vote $60 billion in
federal relief for victims of hurricane Sandy. Now, who in the world would
be against this?

The aid package had already passed the Senate, yet at the last minute,
that relief was abruptly put on hold.

(BEGIN VIDEIO CLIP)

UNIDENTIFIED MALE: The question is on the motion to adjourn. Those
in favor say aye.

UNIDENTIFIED MALE: Aye.

UNIDENTIFIED MALE: Those opposed, no.

UNIDENTIFIED MALE: No!

(INAUDIBLE)

UNIDENTIFIED MALE: In the opinion of the chair, the ayes have it.
Accordingly, the House stands adjourned until 10:00 a.m. tomorrow for
morning hour debate.

UNIDENTIFIED MALE: Mr. Speaker?

UNIDENTIFIED MALE: We`re adjourned.

(END VIDEO CLIP)

SCHULTZ: It`s been over two months since this hurricane struck.
Businesses have been wiped out. Homes have been destroyed. Thousands of
lives are still hanging in the balance, a lot of displaced people. And as
several lawmakers have pointed out today, victims of other major disasters
like Katrina didn`t have to wait as long for aid to come to them.

Despite all of that, what is at stake, here we go with House speaker
John Boehner deciding the House should not take another vote following the
fiscal cliff fight last night. The move left lawmakers from New York, New
Jersey just absolutely stunned and outraged.

(BEGIN VIDEO CLIP)

REP. JERROLD NADLER (D), NEW YORK: To ignore the plight of millions
of American citizens, unprecedented, disgusting, unworthy of the leadership
of this House.

REP. ELIOT ENGEL (D), NEW YORK: I`m usually proud of this House.
Tonight I am ashamed! Shame on you, Mr. Speaker!

REP. BILL PASCRELL (D), NEW JERSEY: This is time to stop debating and
take the gloves off Jersey-style.

REP. GREGORY MEEKS (D), NEW YORK: Will our government help us? Where
are you? Mr. Speaker, we need leadership. Come walk with me, Mr. Speaker.
Come walk with me and see the American people that are suffering.

(APPLAUSE)

(END VIDEO CLIP)

SCHULTZ: And that`s just what Democrats had to say. Republican
lawmakers also took aim at their party`s leadership.

(BEGIN VIDEO CLIP)

REP. PETER KING (R), NEW YORK: Everybody played by the rules, except
tonight, when the rug was pulled out from under us. Absolutely
inexcusable. Absolutely indefensible. We have a moral obligation to hold
this vote!

REP. MICHAEL GRIMM (R), NEW YORK: I think it`s inexcusable that we
did not have this vote.

REP. FRANK LOBIONDO (R), NEW JERSEY: The federal government doesn`t
have a role in this? Absurd! Absolutely absurd! We demand nothing less
than we have given the rest of the country. An emergency and disaster
means emergency and disaster!

(END VIDEO CLIP)

SCHULTZ: Congressman Peter King, a Boehner ally, went even further,
telling folks to stop donating to the House GOP.

(BEGIN VIDEO CLIP)

KING: I`m saying anyone from New York or New Jersey who contributes
one penny to the Republican congressional campaign committee should have
their head examined. I would not give one penny to these people based on
what they did to us last night.

(END VIDEO CLIP)

SCHULTZ: This afternoon, President Obama released a statement urging
the House to pass the aid package immediately. He also phoned governors,
from New York, Andrew Cuomo, and also Governor Chris Christie of New Jersey
a short time later.

Christie, last year`s keynote speaker at the Republican convention,
came out swinging at House leadership.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: This is good enough for 62
United States senators of both parties to vote for this package. This was
good enough for a majority of the House of Representatives. It overcame
all the factual challenges. It just could not overcome the toxic internal
politics of the House majority.

(END VIDEO CLIP)

SCHULTZ: Oh, he`s not done. Christie was just getting warmed up.

(BEGIN VIDEO CLIP)

CHRISTIE: Americans are tired of the palace intrigue and political
partisanship of this Congress. New Jerseyans and New Yorkers are tired of
being treated like second class citizens.

Sixty-six days and counting. Shame on you. Shame on Congress.

This used to be something that was not political. You know, disaster
relief was something that you didn`t play games with. But now in this
current atmosphere, everything is the subject of oneupsmanship. Everything
is a possibility, a potential piece of bait for the political game. And
it`s just -- it is why the American people hate Congress.

(END VIDEO CLIP)

SCHULTZ: Christie told reporters he spent the New Year`s holiday
whipping votes for the relief package. The governor says that he was told
late last night that there would be no vote, and puts the blame on Boehner.

(BEGIN VIDEO CLIP)

CHRISTIE: I was given no explanation. I was called at 11:20 last
night by Leader Cantor and told that authority for the vote was pulled by
the speaker. I called the speaker four times last night after 11:20, and
he did not take my calls. So you have to ask the speaker.

(END VIDEO CLIP)

SCHULTZ: Shortly after that public drubbing, Boehner met with
Northeast lawmakers and promised a vote for this Friday for $9 billion in
flooding aid. Boehner also offered a vote in two weeks for another $51
billion in aid.

Republican lawmakers who had questioned Boehner`s leadership just
hours earlier now claim that they are satisfied.

(BEGIN VIDEO CLIP)

KING: A lot has changed. The bottom line is that we are now
receiving what we asked for. And as far as I`m concerned, what`s done is
done.

(END VIDEO CLIP)

SCHULTZ: Coming up, the one congressman whose constituents got the
shaft from House Republicans last night. Congressman Jerrold Nadler is
ahead. And there`s a lot more coming up in the next half hour of THE ED
SHOW. Stay right with us.

(BEGIN VIDEO CLIP)

LAURA INGRAHAM, RADIO TALK SHOW HOST: Immaculate (ph) concussion.
But did she really have a concussion?

(END VIDEO CLIP)

SCHULTZ: Hillary Clinton continues to get treatment for a blood clot,
and she continues to get trashed by righties.

(BEGIN VIDEO CLIP)

JOHN BOLTON, FMR. U.S. AMB. TO U.N., Fox CONTRIBUTOR: When you don`t
want to go to a meeting or a conference or an event, you have a diplomatic
illness. And this is a diplomatic illness.

REP. ALLEN WEST (R), FLORIDA: I`m not a doctor, but it seems as
though that the secretary of state has come down with a case of Benghazi
flu.

(END VIDEO CLIP)

SCHULTZ: We`ll bring you the latest on the secretary of state.

And Sandy Hook Elementary students begin their return to school as the
president refuses to let gun control fall out of focus. Sam Stein updates
us on where Congress stands in their fight against the NRA.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CHRISTIE: Governor Cuomo and I are as frustrated as two people can be
because unlike people in Congress, we have actual responsibilities.

(END VIDEO CLIP)

SCHULTZ: Welcome back to THE ED SHOW. Sixty-six days after Hurricane
Sandy devastated communities along the East Coast, Republicans in Congress
are delaying a critical disaster relief package. The House, as we told
you, was expected to hold a vote on the $66.4 billion relief bill last
night, but Speaker Boehner pulled the bill from consideration. The House
will now vote on a $9 billion flood insurance bill on Friday, and a
remaining $51 billion in aid will get a vote on January 15th.

Their delay on the Hurricane Sandy disaster relief package rightfully
has members of both parties furious. For more, let`s turn to New York
congressman Jerrold Nadler. Congressman, good to have you with us tonight.

REP. JERROLD NADLER (D), NEW YORK: Good to be here.

SCHULTZ: You know, we`re not talking about the middle of the country.
We`re talking about where there`s a lot of media, there`s millions of
people, and yet relief is not on the way. Why is that?

NADLER: Well, we don`t really know why it is, and people have raised
that question. You know, after Hurricane Katrina, $64 billion was voted
within 10 days. Here it is 66 days later, not a nickel has been voted.

A lot of the Republicans seem very reluctant to vote any money, or --
and certainly enough. $60 billion -- the necessity for $60 billion has
been very well documented by Governors Christie and...

SCHULTZ: So the politics of this pretty inconvenient. With the
backdrop of too much spending in Washington and the Republicans trying to
fight the president on the most recent fiscal cliff, this was just pretty
inconvenient, and they didn`t give a damn about the people. I mean, that`s
my read on it. What about yours?

NADLER: I think that is true to some extent, but it`s even worse
because they had to separate the bill into two bills, $27 billion, and
hopefully, $33 billion extra, on the assumption that most of the
Republicans wouldn`t vote for the full amount that we need. That has never
been the case where you nickel and dime people in desperate straits because
of a natural disaster before.

SCHULTZ: Will there be enough votes for this? Will you get the votes
to get the $60 billion in aid to do right by these Americans?

NADLER: I think the votes will be there now. But you know, because
the speaker pulled the bill last week -- last night, rather -- and we`re
not going to get a vote in the House now, partially tomorrow, but partially
not until January 15th, assuming he`s as good as his word, the Senate has
to do it all over again.

They had already passed it. They`ve got to do it all over again. And
this is totally -- it`s just more weeks of agony for small business people
whose businesses may go under because they don`t get aid in time, for
people who can`t start rebuilding their Houses...

SCHULTZ: That`s the key. That is the key. There`s going to be a lot
-- and I`ve covered disasters in the Midwest. Businesses close and they
don`t reopen, and it hurts a lot of people. Timing is of the essence right
now.

And of course, Governor Christie commented today on New Jersey giving
more taxes back than getting from the federal government, which I think is
a very profound point. Here it is.

(BEGIN VIDEO CLIP)

CHRISTIE: New Jersey and New York are perennially among the most
generous states in the nation to our fellow states. We vote for disaster
relief for other states in need. We are donor states, sending much more to
Washington, D.C., than we ever get back in federal spending.

(END VIDEO CLIP)

SCHULTZ: Should that matter, Congressman?

NADLER: Well, only in the sense that it shows the inequity of what`s
happening. The fact is -- Senator Moynihan used to maintain an annual
list, and it showed that we sent $18 billion or $19 billion more to
Washington than we got back.

But the fact is, we`re lucky enough to have the industry and the tax
revenue and enough upper-income people to do that. We should spend money
where it`s needed and raise it where you can equitably. So that never
bothered me.

But if when we need it, the rest of the country says, You can`t have
the money, we`re going to treat you differently than everybody else, then
it raises real questions.

SCHULTZ: You`ve got a lot of Americans displaced on the East Coast
because of this. Is this government, is this Congress, is this, the U.S.,
at its worst hour of sorts?

NADLER: Well, it`s at a very bad hour. I don`t know that I want to
say it`s its worst hour, but it`s a very bad hour when you nickel and dime
people in desperate straits, Americans in dire straits, you don`t send help
to them. It`s been 66 days already and you`re still trying to say -- a lot
of the Republicans -- a lot of the people in Congress, Republicans, won`t
vote adequate funds, and then they put it off for no reason at all.

And the contempt with which the speaker did it, giving no reason at
the last minute. We were told 20 minutes before to expect a vote, and all
of a sudden, it`s not going to happen, and no reason given, and he won`t
even talk to even Republicans from New York and New Jersey.

SCHULTZ: Is this how Boehner operates?

NADLER: I can`t think of anything this bad.

SCHULTZ: Is this -- is this how Boehner operates? I mean, listening
to Chris Christie today explain that he was shown no respect whatsoever
when people are struggling, didn`t even get a call back, calling him for
times -- is this how Boehner operates?

NADLER: I haven`t seen that before. But he didn`t call the governor
back. He wouldn`t -- refused to meet with the Republican congressmen from
New York who wanted to go in and say, What are you doing, and why? He just
wouldn`t talk to any of them or anybody else.

SCHULTZ: If he operates like that, I think it gives us a pretty good
insight about what kind of a tough customer he was to deal with in
negotiations with the White House.

NADLER: That`s probably true.

SCHULTZ: I mean, I would draw that conclusion. Congressman Jerrold
Nadler, great to have you with us tonight. I hope it all works out.
People need the help.

Coming up, the latest on Secretary of State Hillary Clinton`s
condition, and a look at Fox News`s shameless conspiracy theory about her
health.

(COMMERCIAL BREAK)

SCHULTZ: And we always love hearing from our viewers on Twitter and
our Facebook page. Many of you are talking about the scathing criticism of
Speaker John Boehner, following Republicans like New Jersey governor Chris
Christie, for holding up relief for victims of Hurricane Sandy.

John Cobb (ph) invites Christie to come over to the left. Plenty of
room for you, and we care. James Tyo (ph) says he`s ashamed to call
himself a Republican after Sandy. And April Anderson (ph) calls it the
inevitable cannibalization of the GOP.

Keep sharing your thoughts with us on our Facebook and use the hashtag
#edshow on Twitter.

As Washington looks to change the laws on assault weapons in the wake
of the Newtown shootings, some states are taking school security tips from
the National Rifle Association? Details ahead. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: And we are back. And there is some good news to report
tonight. Secretary of state Hillary Clinton has been discharged from the
New York Presbyterian Hospital. Clinton was admitted Sunday after doctors
discovered a blood clot near her brain stemming from a concussion she
suffered earlier in December. Doctors are treating the clot with blood
thinners and say that Clinton is making good progress. They`re confident
she`ll make full recovery. Serious stuff.

You know who didn`t take it seriously? The fair and balanced folks
over at Fox News. The Fox lineup spent the last two weeks suggesting that
the secretary of state faked her fall to avoid testifying about the attack
in Benghazi.

Just like most conservative conspiracy theories, there was absolutely
no evidence to support their claim, but that didn`t stop Fox from
politicizing Clinton`s illness and having a few laughs at her expense.

(BEGIN VIDEO CLIP)

JOHN BOLTON, FMR. U.S. AMB. TO U.N., FOX CONTRIBUTOR: When you don`t
want to go to a meeting or a conference or an event, you have a diplomatic
illness. And this is a diplomatic illness to beat the band.

SEAN HANNITY, HOST, FOX NEWS "HANNITY": Charles, you had a good line.
Hillary has severe Benghazi allergy.

CHARLES KRAUTHAMMER, FOX CONTRIBUTOR: Yes, I`ve been doing a lot of
work on that, investigating. She`s the first reported case, and it`s a
very, very severe one.

HANNITY: Very, very severe. Let`s see the medical report on that.

REP. ALLEN WEST (R), FLORIDA: I`m not a doctor, but it seems as
though that the secretary of state has come down with a case of Benghazi
flu.

LAURA INGRAHAM, RADIO TALK SHOW HOST: Immaculate (ph) concussion
because it`s, like, if a tree falls in the forest, does it really fall if
nobody hears it fall? Did she really have a concussion?

UNIDENTIFIED MALE: How could she get a concussion when she`s been
ducking everything? This is what I don`t understand!

(LAUGHTER)

(END VIDEO CLIP)

SCHULTZ: Suddenly, everyone on Fox News is a doctor.

Hillary Clinton has served this country as first lady, as a senator
from New York and the secretary of state. I don`t expect much from Fox
News. I wouldn`t hold my breath waiting for an apology that Clinton
certainly deserves. But I do expect a bit more respect for a woman who has
served this country for 20 years. Laura Ingraham, so unlike you.

Tonight in our survey, I asked you, Is the fiscal cliff deal a victory
for the middle class? Eighty-two percent say yes. Eighteen percent of you
say no.

Coming up: It looked like a victory for the NRA. Hundreds of teachers
took a weapons training class over the holiday break. Find out where the
debate over gun control stands tonight. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: And we`re finishing the show tonight with a promise. We
won`t let the debate over gun control get lost in the political shuffle.

Children who survived the massacre at Sandy Hook Elementary are going
back to school tomorrow morning. Security is incredibly tight. Police set
up checkpoints for an open house today. Crews have transformed Chalk Hill
(ph) Middle School into a replica of Sandy Hook. They`ve moved the kids`
old desks and art and backpacks. The armed officers will be stationed on
campus.

(BEGIN VIDEO CLIP)

LT. KEITH WHITE, MONROE POLICE DEPARTMENT: Our goal is to make it a
safe and secure learning environment for these kids to return to, along
with the teachers also.

(END VIDEO CLIP)

SCHULTZ: It`s been 20 days since Adam Lanza murdered 20 1st graders.
We`ve seen 20 days of intense debate over gun control. So far, the
National Rifle Association has made major headway. NRA president (SIC)
Wayne LaPierre offered to post an armed NRA member inside every school in
America. The idea was widely criticized.

But just a few days after Christmas, hundreds of teachers attended the
NRA`s free weapons training course in Utah. This is a 4th grade teacher
learning how to use a handgun. This is another 4th grade teacher
practicing with a plastic gun. Gun clubs in Arizona and Ohio claim they`ve
been getting flooded with applications from teachers who want gun training.

The NRA has moved quickly, but President Obama is steadfast. He
repeated his commitment to stopping gun violence during the news conference
last night. California senator Dianne Feinstein is introducing an assault
weapons ban on the first day of the new session.

The gun debate comes down to this. The NRA is arming teachers. The
Democrats need the political will to fight back.

Let`s turn to Sam Stein, political reporter, HuffingtonPost, with us
here tonight. Sam, they never cease to amaze us. Can Democrats pass an
assault weapons ban despite the National Rifle Association? Has the
political climate changed in this debate?

SAM STEIN, HUFFINGTONPOST: I don`t think enough. Now, of course,
things can change. You can make -- you can make a case, you can start a
grass roots campaign, you can build a movement around a piece of
legislation.

But if you look at the political numbers on the Hill, you would have
to conclude at this juncture that it`s going to be a really heavy lift for
supporters of the assault weapons ban. And I think that`s part of the
reason why you see some other lawmakers looking at other, sort of slimmer
(ph) measures such as a ban on high-capacity magazines, which will also be
introduced on the first day of Congress.

SCHULTZ: Today, a town in New Jersey posted armed officers at all of
its schools for the next 90 days. Marlboro (ph) township says it`s
discussing permanent security changes. Your thoughts.

STEIN: Well, I mean, we live in a society, in a culture, that, you
know, loves guns. And I think it`s sort of evidenced in the fact that
sales of assault weapons were apparently off the charts in the aftermath of
the shooting at Sandy Hook.

And this has been the case almost every time that we`ve had an
instance of mass gun violence, whereby people think that the natural
response is for the government to go and get guns already out there.

And so a colleague and I went to a gun show, for instance, after the
shooting in Aurora, and we saw a similar thing, where people were buying
high-capacity magazines because they assumed that the government would
crack down on it. So it doesn`t surprise me necessarily that people are
doing this and turning to this. They want a sense of security, and having
an armed weapon gives them that sense of security.

SCHULTZ: I mean, we`re seeing the National Rifle Association move
fast on this. Have they outmaneuvered the Democrats?

STEIN: Well, there`s always been a concern that if you wait too long,
not only would the NRA move fast, and other people who are 2nd Amendment
enthusiasts, but that the public conscience would fade away, the desire to
see some sort of legislative action.

The good news is I`ve had conversations with people on the Hill,
including in the administration, and they are committed to doing gun
control. And not only that, one administration official told me they want
to do it in the month of January.

So they recognize that the window, the legislative window here is
relatively narrow, and that it could be closing on them. And so they
recognize that they have to move fast. But it is, in some respects, a race
against -- a race against the clock.

SCHULTZ: OK. Sam Stein, good to have you with us tonight.

STEIN: Thanks, Ed.

SCHULTZ: Appreciate your time so much. You bet.

And on a much lighter note tonight, this was the last sunrise of 2012
on big Detroit lake in northern Minnesota. This is a very rare occurrence.
It is a double sun dog. That is the sun rising, and those are the two sun
dog effects off to the side. It -- that was a picture I took. It was just
absolutely amazing.

Rachel, don`t ask me to explain this. I think it means I just should
have been catching more fish. That`s all I can come up with.

(LAUGHTER)

SCHULTZ: And that is THE ED SHOW. I`m Ed Schultz, and Rachel is with
us tonight. I hope you had a great holiday.

RACHEL MADDOW, HOST, "THE RACHEL MADDOW SHOW": I did. I took a whole
bunch of time off, more time than I`ve taken in a long time. And what I
did with it is I cleaned the basement because now I`m an old person, and
that counts as an exciting way to spend time off.

SCHULTZ: You`re one of those Americans who throws everything in the
basement who will deal with it later!

(LAUGHTER)

MADDOW: Exactly.

SCHULTZ: I understand. I`ve been there.

MADDOW: Thanks, man. It`s great to be back.

SCHULTZ: You bet.

MADDOW: It`s nice to see you.

SCHULTZ: Thank you, Rachel.

MADDOW: Thanks to you at home for joining us, as well. It is great
to be back. And my basement -- spectacular!

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

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