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'The Last Word with Lawrence O'Donnell' for Wednesday, January 2nd, 2013

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THE LAST WORD WITH LAWRENCE O`DONNELL
January 2, 2013

Guest: Michael Cusick

LAWRENCE O`DONNELL, HOST: So, as expected we went off the cliff. And
Republicans got so scared, so wicked scared that they gave Democrats what
they wanted in less than 24 hours.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The ayes have it, accordingly, the House stands
adjourned.

UNIDENTIFIED FEMALE: With 58 minutes to spare, Congress averted the
fiscal cliff.

CHRIS JANSING, MSNBC ANCHOR: Nobody is celebrating this morning, but
the deal is done.

UNIDENTIFIED FEMALE: The tax issue has been resolved.

UNIDENTIFIED MALE: The House approved the Biden-McConnell.

UNIDENTIFIED FEMALE: The president got a victory.

UNIDENTIFIED MALE: John Boehner got rolled.

UNIDENTIFIED MALE: John Boehner has had permanent damage done to him.

JANSING: John Boehner walked past Harry Reid and said, go blank
expletive yourself, go F yourself.

CLINT EASTWOOD, ACTOR: Can`t do that to himself.

JANSING: And then bragged about it.

UNIDENTIFIED MALE: Does John Boehner even want this job anymore?

UNIDENTIFIED MALE: One long national nightmare is now finally over.

UNIDENTIFIED MALE: One battle down, another one commences.

UNIDENTIFIED MALE: One deadline after another.

UNIDENTIFIED MALE: Debt limit.

UNIDENTIFIED MALE: The debt ceiling.

UNIDENTIFIED FEMALE: The debt ceiling.

UNIDENTIFIED FEMALE: The debt ceiling is coming.

UNIDENTIFIED MALE: No.

UNIDENTIFIED FEMALE: The sequesters are coming. Cue the next
countdown clock.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not have another
debate with this Congress.

LUKE RUSSERT, NBC NEWS: House Republicans see it as a trump card.

OBAMA: They should pay the bills they have already racked up.

GOV. CHRIS CHRISTIE (R), NEW JERSEY: The American people hate
Congress.

UNIDENTIFIED FEMALE: While the House approved its deal to avert the
fiscal cliff.

CHRISTIE: Last night, the House of Representatives failed.

UNIDENTIFIED FEMALE: There was no deal to send money to the victims
of hurricane Sandy.

CHRISTIE: Shame on you. Shame on Congress.

UNIDENTIFIED FEMALE: Lawmakers from New Jersey were livid.

CHRISTIE: Last night, it was my party responsible.

ANDREA MITCHELL, MSNBC ANCHOR: They are leaving this party without
help.

CHRISTIE: Shame on Congress.

UNIDENTIFIED FEMALE: Congress.

CHRISTIE: Congress.

OBAMA: Congress.

UNIDENTIFIED MALE: The laughing stock of the country.

CHRISTIE: Sixty-six days and counting, shame on you, shame on
Congress.

(END VIDEOTAPE)

O`DONNELL: All right. Let`s get a couple of things straight here,
OK? First of all, there is nothing wrong with legislating at the last
minute. In fact, on the big stuff, the politically difficult bills, it is
usually impossible to legislate before the last minute.

Now, if you never found yourself rushing to the post office on April
15th with your tax return in hand, then you maybe you`re not going to
understand this. And if you`re one of those people who did most of your
studying for final exams before the last minute, then you, too, might have
trouble understanding this. But in most human endeavors, if there is a
deadline, nothing much will get done before the deadline.

And in legislation, which is essentially a talking process, me trying
to convince you to do something you don`t want to do or you trying to
convince me, and you`re never allowed to hit me or pull a gun on me, you`re
only allowed to reason with me it is very, very unlikely that you will get
me to change my mind, very unlikely you will get me to do something I don`t
want to do before the very last minute.

All legislative leaders in the Congress have always known this.
That`s why they have deadlines in congress. A deadline is that point on
the calendar, that hour in the day when you are left in Congress with
nothing but one word to say -- yes, or no.

If you leave members of Congress with time to say more than one word,
they will. They will talk, and talk forever, about why they don`t want to
do the difficult thing. And only at the deadline can you get them to
actually say yes or no to doing the difficult thing -- 89 said yes in the
United States Senate, 257 said yes in the House of Representatives at the
deadline. And they could only do it after the technical deadline of the
fiscal cliff had passed, but before the practical deadline of the stock
market opening this morning.

And today the stock market that had remained calm throughout the
fiscal cliff melodrama gave a standing ovation to the result. The Dow
closed up 308 points. The markets obviously didn`t care that the deal was
done at the last minute. In fact, the markets always correctly expected
the deal to be done at the last minute.

And the other thing, the other thing we have to get straight right now
is, did the president get a good deal? And I have this question for anyone
who says the president and Joe Biden got a bad deal, they caved. As some
of the online headlines said -- caved to Republicans on income tax rates.

And that question is this, when is the last time you successfully
negotiated an income tax increase with Republican senators and congressmen?

I will save you some time with that answer right now. There is no
Democrat or liberal working in government or politics today or commenting
on government and politics today who has ever, ever negotiated an income
tax increase with Republicans. The last time Republican members of
Congress agreed to vote for an income tax increase, they did so in support
of a Republican president who was pleading with them to do it, 22 years
ago.

Now let`s consider the evolution of the Democrats` position on the top
income tax rates this time.

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER (D), NEW YORK: Democrats had originally called
for tax cuts for people below $250,000, Republicans for everybody. What if
we moved it up to a million? Everybody below a million will get a tax cut,
but the millionaires and billionaires won`t. I think that`s a good
compromise.

(END VIDEO CLIP)

O`DONNELL: So, President Obama was not negotiating just with
Republicans on exactly where the top income bracket should be. Many
Democrats in the Senate and the House wanted it to be higher.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D), CALIFORNIA: And for definitely -- letting die
the tax cuts for people making over a million dollars a year. Let`s begin
by getting tax cuts for people making over a million dollars a year. I`m
not even saying $250,000.

UNIDENTIFIED MALE: I know.

PELOSI: And the president is saying $250,000.

(END VIDEO CLIP)

O`DONNELL: With friends like those, tell me, tell me, how was the
president ever supposed to hold the top income tax bracket all the way down
at $250,000? Because once you give up ground publicly in legislative
strategy, the way Chuck Schumer and Nancy Pelosi did, it is impossible to
get it back -- until New Year`s Eve when the president was able to actually
get most of that back. Get a deal with Republicans on a top income tax
bracket that kicks in way below a million dollars. It kicks in at $400,000
of income.

And some reported that as the president caving.

But $250,000 was what the Democrats legislated as the top income tax
bracket 20 years ago, an index for inflation as income tax brackets are,
the top income tax bracket has moved up since then to $397,000. That`s
what it was last week. Last week, under the Bush tax rate, the top income
tax bracket was $397,000, just as it would have been if the Clinton tax
rates had never been overridden by the Bush tax rates.

So, $400,000 this week, being taxed at 39.6 percent, the Clinton rate,
is exactly where we would be tonight if Bill Clinton`s tax rates had never
been repealed. And anyone who believes President Obama gave up too much to
the Republicans, has to tell us what he or she would have given up to the
Republicans in order to get an extension of unemployment insurance for
people who desperately need it -- unemployment insurance that was going to
be cut off today.

For more on the deal, joining me now, our resident fiscal cliff deal
experts, "The Washington Post" Ezra Klein, and former chief economist to
Vice President Biden, Jared Bernstein.

Jared, first to you since Joe Biden was so key in negotiating this
deal, give me your take on the deal.

JARED BERNSTEIN, MSNBC CONTRIBUTOR: Look, I think the deal was kind
of a small step in absolutely the right direction. I`m not quite as
bullish in many ways as you just sounded, although I thought your argument
was very compelling. I kept telling myself as I listened to you, I thought
this was kind of dysfunctional, you know, the way you just went through it
made it sound a lot better. And I thought you made a lot of compelling
points, Lawrence.

Look I thought the revenue was a little bit light. I also thought
that the fact that the debt ceiling is still alive and kicking is tough.
You know, the fact that the sequester, hits again, comes back in March, the
automatic spending cuts. I thought the estate tax, I thought, kind of the
Democrats met the Republicans a little bit more on their side of the field
on that one.

But, look, the general point moves in the right direction -- $600
billion in revenue over 10 years. The unemployment, I don`t think you
mentioned a set of refundable tax credits that were alive for four years
now to help the low income people. All of this is movement in the right
direction.

And, you know, for me, the main criteria, are we moving in a situation
where we can have an amply funded government and a sustainable budget, this
is a step in the right direction. Whether we maintain that direction has a
lot to do with some big upcoming fights in a matter of weeks.

O`DONNELL: Ezra, the question I`m trying to get to is not what I
would want. I would want much higher brackets going on upper income
levels, $10 million, $100 million, there are a lot of differences I would
want in the tax bracket structure.

But given what the president was trying to do, which was to get to
that 39.6 threshold, the old Clinton threshold, and given the fact that you
have to do this with a Republican House of Representatives, the whole
exercise begins with you`re not going to get everything you want,
especially when you`re trying to negotiate pieces that have nothing to do
with the fiscal cliff, that there`s no automatic outcome on the fiscal
cliff like the unemployment insurance extension.

And so --

(CROSSTALK)

O`DONNELL: -- what I have been trying to get at, Ezra, is the
practical outcome, and I personally believe I can`t see how they could have
under these circumstances negotiated a better practical outcome with those
opponents they were negotiating with.

EZRA KLEIN, THE WASHINGTON POST: I think it`s simultaneously true
this is good a deal -- this is probably about the best outcome they could
have had given the circumstances. And it`s not, as Jared said, an ideal
deal.

Look, I`m more in your camp here, Lawrence. I think the deal was
actually pretty good. I think the key point about this deal is they
pocketed about $630 billion of revenue and didn`t really give up a dollar
in spending. They didn`t give up a dollar in anything.

What is going to ultimately decide whether or not they got a good deal
though is what comes next. So, here`s what Republicans think what`s about
to happen, right? They believe we`re going to hit the debt ceiling,
Republicans are going to threaten to push the country into default, unless
the president and the Democrats allow enormous number of spending cuts and
no more tax increases.

And so, in the end, you`re going to have an enormous spending cuts and
just $650 billion in tax increases.

The president and the White House say there`s absolutely no way they
will not be held hostage on the debt ceiling. And if Republicans want cuts
coming up, they`re going to have to offset it with tax increases.

And if the White House is right about it, then I think we`ll probably
to be right on it, then I think we`re going to look back, add up all the
numbers and this will look like a pretty good deal. With one exception,
that we`re losing a lot of stimulus and not replacing it. And that is a
problem here.

But in terms of the long term budget deal, if the White House is right
they can get taxes in the next phase of the deal, too, I think it will look
good.

O`DONNELL: Yes, Ezra, and I`m prepared to analyze what this deal was
right here without necessarily making it how good it is depending on what
happens in the future. But I agree with you completely about what`s
coming. And Jared, I`ve been listening to the president very carefully
about what he is saying about he will not negotiate on the debt ceiling.
He has absolutely ruled out using his own executive powers raising the debt
ceiling.

So, it seems to me what he is that saying when the Republicans come to
him to negotiate massive spending cuts on the debt ceiling, he is simply
going to say no. And he is going to dare them to go up again against the
debt ceiling, and risk the country crashing into the debt ceiling, on the
belief that they have learned the lesson and they won`t do it.

BERNSTEIN: Wow, that`s -- you know, you may be right. But I think
that`s kind of a tough belief if that`s where he`s coming from because I`m
not convinced and I doubt that you two are that the Republicans won`t go
over what I believe is actually a real cliff on like the fiscal cliff,
which is defaulting.

And so, when I hear the president say, I will not negotiate with
Republicans over the debt ceiling, that makes me feel very good because to
me, the quality of the deal that we have been talking about right now is
fully a function of the president maintaining that stance. If he goes
anywhere near this thing that is called the Boehner rule, where John
Boehner says for every dollar increase that we give you in the debt ceiling
you have to give us a dollar of spending cuts.

And, by the way, the Republicans believe they are out of the tax
increasing business. They don`t think they`re going back to that well.
The president thinks that they will. They also believe they have the
leverage now with the debt ceiling.

The only way the president gives him that leverage is to negotiate
with them. So he has to stand very, very firm on that.

O`DONNELL: I`m betting that he is going to stay tough on the debt
ceiling. And I`m also betting that -- I may be the only one -- I think
they`re going to pull more revenue out in the next Congress through tax
reform elements on deductions and exemptions. We`ll see what happens with
that.

Ezra Klein and Jared Bernstein, thank you both for joining me tonight.

BERNSTEIN: Thank you, Lawrence.

KLEIN: Thank you.

O`DONNELL: Coming up, Republicans versus Republicans. John Boehner
versus Eric Cantor, and Republican Governor Chris Christie versus Boehner,
and New York Congressman Peter King versus John Boehner.

And Karen Finney will be here with the latest on Hillary Clinton`s
condition and the Republicans who lied about that.

And in the "Rewrite" tonight, the secret governing, totally secret
governing, that took place in the United States senate today. Even though
it was on C-Span, it was completely a secret. I know you have been told
that the Senate has been closed for business after the fiscal cliff vote.
But that is not true.

The truth is that the Senate works better than you think. And it did
that today. That`s coming up.

(COMMERCIAL BREAK)

O`DONNELL: It`s hard out there for a Boehner. House Speaker John
Boehner couldn`t even get the support of his own leadership team on the
fiscal cliff vote yesterday. And some Republicans say that the disarray,
the chaos inside the Republican Party is only going to get worse. That`s
next with Krystal Ball and Richard Wolffe.

And later, if you think 89 votes for the fiscal cliff deal was
amazing, and it kind of was, how about 100? That`s how many votes Harry
Reid got in the Senate today for some important things that nobody is
telling you about. That`s in the "Rewrite".

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BILL O`REILLY, FOX NEWS: A lot of this debate in Washington is, I
think, driven by the president who wants to destroy the Republican Party.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: But he said, no, you have
to raise rates. Why? Because he knew that would accentuate the fractures,
the fissures in the Republican Party. It would neutralize the one
opposition to this institution, the House of Representatives. That`s
exactly what happened, he succeeded in that. The House has been neutered,
you saw that last night and if he gets the House out of the way, he can
then be dominant in Washington for his entire second term.

(END VIDEO CLIP)

O`DONNELL: Today, the leading conservative Web site ran this
headline, "Palace Intrigue," which linked to this article in "The
Guardian." "In closed door meetings of the House Republican conference,
House Majority Eric Cantor expressed his opposition to the Senate bill
before Boehner had taken a stand, when the majority leader said out loud
what most Republicans were thinking about the fiscal cliff bill. There was
admiration.

As reports of the meeting leaked out, observers began to wonder if a
Cantor coup against Boehner was brewing."

Joining me now, Krystal Ball, Richard Wolffe.

So, the rumors today, Boehner versus Cantor, just completely out of
control. We`ll know soon enough, the House elections Thursday, right?

KRYSTAL BALL, MSNBC HOST: Yes, we will know soon enough. I mean, it
was also interesting not only on the fiscal cliff deal. But then with
Sandy relief, Cantor went and threw Boehner right under the bus for not
bringing that to the floor. And Cantor is worried about not only about,
you know, his position vis-a-vis the caucus, but he`s also worried about
the donors that he has in the New York and New Jersey area.

It`s interesting how quickly he brought the long knives out. Now, I
don`t think that Cantor is going to organize a coup for this week,
personally, partly because anyone who is speaker of the House right now has
to deal with the basic dynamics that John Boehner is dealing with. And
that is not particularly an attractive position for somebody to be in right
now.

O`DONNELL: Richard Wolffe, this is a rough New Year`s.

RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Yes.

O`DONNELL: Republicans, especially the high income Republicans.

WOLFFE: Yes.

O`DONNELL: But there is FOX News --

WOLFFE: They`re going to be OK.

O`DONNELL: But there is O`Reilly and Krauthammer, bringing them down
even further, saying that the Republican House has been neutered.

WOLFFE: Neutered. You know, if only the White House were this good.

O`DONNELL: Yes.

(LAUGHTER)

WOLFFE: And the second reaction --

O`DONNELL: Krauthammer is pretending the House of Representatives has
disappeared and the president doesn`t have to deal with them.

WOLFFE: Right, which is wishful thinking.

O`DONNELL: Yes.

WOLFFE: And also a little bit paranoid. Krauthammer ought to be able
to self-diagnose on that.

There is -- there`s a basic dynamic that gets to the heart of this.
It`s not that Cantor somehow doesn`t want the job. We all know he wants
the job. That is where the rumors come from.

But there is an even sweeter spot being the speaker. You know, if
you`re a Republican, there is one position, being in the opposition to the
president, and that`s being in opposition to the opposition. That is a
sweet spot. You can be in opposition to Obama and being in opposition to
the establishment. So why would you ever want that job? You can be much
more popular not having the job.

You know, they used to say that the vice president`s job was the worst
job in Washington. Actually right now, being leader of the House --

O`DONNELL: The vice president looks pretty good right now.

BALL: Yes.

O`DONNELL: Some fascinating votes here -- I mean, in the House, you
had Paul Ryan. And he issued a statement voting for it. And Paul Ryan
saying, listen, this is the best thing we can do under these circumstances,
the reasonable man`s statement.

Senate, Marco Rubio, future presidential candidate hopeful, votes
against it, which seems like the right vote if you want to run for
president next time.

Can you imagine how Ryan and Rubio would be on a Republican primary
stage next time around, Ryan having voted for this, Rubio against this? It
seems like Rubio is already in the lead.

BALL: Yes. I mean, actually, after Rubio took that vote, I was
really surprised when Paul Ryan voted for that vote. I was stunned by that
vote. And I think the calculus there is Rubio was thinking he needs to
shore up the right flank, make sure he is looking appealing in the
Republican primary, Paul Ryan must be calculating that he`s got the
conservative crud down that he needs to play more to the middle, more to
the donor base, maybe in New York, the Wall Street folks who didn`t want to
go over the cliff.

But he is looking like I have the conservatives down, I need to look
like the reasonable guy.

O`DONNELL: The Ryan thing was easy to explain. Number one, he
obviously watches the show.

WOLFFE: Clearly, for sure.

O`DONNELL: He knows that losing vice president candidates knows that
they never become president. He knows that history is stack against him.
He might as well go along with the leadership. He is never going to be
president. That is obvious.

WOLFFE: And he is going to vote against immigration reform, and Rubio
is going to --

(CROSSTALK)

WOLFFE: He is thinking ahead, he is thinking about next week`s show.

O`DONNELL: He is thinking about the way to play this.

Let`s look at what "The National Review" said today about this, trying
talking some sense to conservatives. "The deal was worth passing." That`s
something they don`t want to hear. "Conservatives who judge these matters
should make the case without suggesting falsely the taxes would have stayed
down if only McConnell, Boehner had not caved. Republicans who supported
the deal meanwhile should not over-sell it. They can`t make "limit the
damage" their slogan and battle cry."

Krystal, that`s the point, is that if you`re going to attack Boehner
and these guys, you`re going to have to then pretend that all rates were
not going to go up, if they hadn`t done this.

BALL: Right, and interestingly, I mean, even though you only had 86
Republicans vote for this, they did decide to let this go to an up or down
vote to the House, rather than pushing for that amended bill, and basically
throwing the whole thing into chaos.

So I think they looked down the barrel of the gun and decided they
didn`t want to go over the fiscal cliff either.

O`DONNELL: But, Richard, those 47 Republicans votes in the Senate was
really something.

WOLFFE: It was huge. But remember, Republicans now think the Bush
tax cuts are caving. The Republicans do not believe in a system where rich
people pay more tax because they want a flat tax. That`s how far they
traveled in four years.

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

BALL: Thanks, Lawrence.

WOLFFE: Thank you.

O`DONNELL: Coming up, more Republicans bashing more Republicans,
including more of what Governor Chris Christie thinks now about his party.

And in the "Rewrite" tonight, the secrets of the United States Senate,
the secrets the media never tells you about, even though they`re right
there happening on C-Span.

(COMMERCIAL BREAK)

O`DONNELL: Governor Chris Christie is mad as hell and he is not going
to take it anymore -- from House Republicans. Why John Boehner refuses to
take Chris Christie`s phone calls. That`s next.

And in the "Rewrite" tonight, what the Senate did today. That`s
right, today, the United States Senate. I know you have been told that the
Senate is closed for business. That`s not true. Harry Reid got some good
work done in the Senate today and he got 100 votes for things that for some
strange reason no one has told you anything about.

(COMMERCIAL BREAK)

O`DONNELL: Harry Reid got some good work done in the Senate today and
he got 100 votes for things that for some strange reason no one has told
you anything about.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: There is only one group the
blame for the continued suffering of these innocent victims. The house
majority and their speaker, John Boehner. Last night, politics was placed
before our oath, to serve our citizens. For me, it was disappointing and
disgusting to watch.

(END VIDEO CLIP)

O`DONNELL: That was New Jersey`s Republican governor Chris Christie
today slamming fellow Republican John Boehner for canceling a vote late
last night that would have provided billions of dollars in federal aid to
victims of hurricane Sandy.

In the spotlight tonight, Republicans versus Republicans. Republican
congressman Peter King of New York attacked his leader`s decision earlier
today.

(BEGIN VIDEO CLIP)

REP. PETER KING (R), NEW YORK: Republicans have no trouble finding
New York when it comes to raising money. And I would just say anyone from
New York or New Jersey who contributes one penny to congressional
Republicans after this should have their head examined.

(END VIDEO CLIP)

O`DONNELL: John Boehner`s decision not to vote on hurricane relief
for Sandy last night once more puts him at odd with the house majority
leader, Eric Cantor.

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER (D), NEW YORK: This failure to get relief now
could be called the Boehner betrayal. Here is the amazing irony, the more
conservative member of the house membership Eric Cantor was supportive.

CHRISTIE: I spoke to majority leader Cantor earlier today. I have to
tell you that I think that Eric was working as hard as he could to get this
done for us. I`m not going to get into the specifics of what I discussed
with John Boehner today. But what I will tell you is there is no reason
for me at the moment to believe anything they tell me.

(END VIDEO CLIP)

O`DONNELL: Joining me now, New York assemblyman representing Staten
Island, Michael Cusick.

This Republican stuff is wild. I mean, there is Chris Christie saying
you know, John Boehner is a liar of some kind. And then it is Eric, it is
first name Eric, with Eric Cantor. Everyone thinks that Chris Christie
wants to be a Republican presidential candidate. It is getting stranger
and stranger, imagining Chris Christie on a Republican primary stage with
all of this bashing of Republicans he is willing to do.

JOY-ANN REID, MSNBC POLITICAL ANALYST: Yes, it is amazing, palace
intrigue at its worst. I mean, Eric Cantor is trying to be everybody`s
friend here. He is the tea party`s best friend when it comes to issue of
tax increases. And now, he is the New Jersey politicians and New York`s
politician`s best friend when it comes to Sandy relief.

You know, I think to give it the best read you can to John Boehner, to
the worse, he is a terrible speaker. He doesn`t really know what he is
doing. But the best read you can give is that her haven`t 85 of members
had to walk the plank, and vote for tax increases with no spending cuts.
He felt like he could make them walk the blank again on a pure spending
bill. So, Boehner was in a vine, because he doesn`t want a rebellion among
the members who then have to friable tomorrow for speaker. It only takes
18, 19 to them to turn on him for him to lose the gable.

So, Boehner is in an impossible situation and he has got this deputy,
Eric Cantor, with zero loyalty.

O`DONNELL: Yes. Michael, you`re from Staten Island. The Democrat
from Staten Island which is actually unusual --

NEW YORK ASSEMBLYMAN, MICHAEL CUSICK (D), STATEN ISLAND: There is a
few of us out there.

O`DONNELL: I don`t think everybody understands that the New York City
Congressional delegation normally sends exactly one Republican to the House
of Representatives and that is from Staten Island, and your congressman,
Michael Grim, who you just reelected. He had a serious problem with what
went on here.

CUSICK: Yes, as did all the elected officials on Staten Island. What
happened, the inaction that happened in Congress was a disgrace.

Lawrence, you have been in Staten Island and all of New York with all
the devastation. We`re not asking for a handout. This is devastation.
This is a natural disaster that other parts of the country, they got
relief. And that is what we`re asking for is relief from our government.
And the help they need. And you saw it firsthand, many of the people
watching have seen it firsthand. These folks need this money. This money
will go to use to help people rebuild their lives, rebuild their houses and
rebuild their businesses.

O`DONNELL: And Joy, one of the interesting political dynamics of
this, this is not Staten Island asking for a handout. This is Staten
Island asking for its money back. The state of New York and New York City
sends way more money into the federal treasury through the income tax than
it ever gets back in federal spending.

REID: Yes, absolutely, New York and New Jersey are both donor states.

O`DONNELL: Yes, and Chris Christie made this point very well today.

REID: He made and I felt that it was one of the most effective parts
of the presentation. He walked through disasters in Louisiana, Florida,
and then he made the point, which is absolutely true, that both New York
and New Jersey give more in taxes to the federal government than they ever
get back. So, they`re just asking now for some of this money back when
they`re in dire need. And you know, what they`re also donors, they put a
party, the political party has come right to New York when they have to
raise money to get reelected. And now for politicians to have simply say
they have to wait is both cruel and also terrible politics.

O`DONNELL: Michael, the latest, Boehner seems to be saying well OK,
with the new Congress we will try, try to get this done somewhere around
January 15th. The trouble is, there is no bill now. There is a whole new
congress. So now you have to run something through the United States
Senate again through both bodies, very hard to get these things through
again.

CUSICK: Right. And Joy and I were talking about this in the green
room, to start over from point A.

O`DONNELL: Yes, that`s what they have to do,

CUSICK: It is tough. I mean, as you said, Lawrence, you have to go
back to the Senate. You have to pass the bill, and then, Congress can put
amendments to it that the Senate doesn`t like. And it goes back and forth.
The easiest thing and maybe I`m just talking as somebody who has seen the
devastation firsthand. The easiest thing would have been done would have
been to do it all last night. Get it done with, and you then could have
lived with what happened.

REID: Yes, they should have are ripped the scab off and just done it.
The only popular Republican in the country, Chris Christie, and now, they
want to break this bill down in little pieces and do it over and over
again, it is insanity.

O`DONNELL: I don`t know, Chris Christie seems more of a winner, long-
term on this, than John Boehner does.

CUSICK: Absolutely.

REID: Absolutely.

O`DONNELL: Staten Island assemblyman Michael Cusick and Joy Reid,
thank you both for joining us tonight.

CUSICK: Thanks, Lawrence.

O`DONNELL: Coming up, secretary of state Hillary Clinton is out of
the hospital tonight. Karen Finney will join me with the latest and what
Republicans are saying now about whether she was really ill.

And on the rewrite tonight, how the Senate really works and why it
actually works much better than you think it does. Much better than anyone
that tells you it does, which is exactly what it did today when everyone
thought the Senate was not working at all.

(COMMERCIAL BREAK)

O`DONNELL: I`m going to try something wicked hot tonight, something
that may be impossible. I`m going to try to rewrite your understanding of
how the Senate works, that hopelessly grid locked Senate, that filibuster
booby-trapped Senate that can never do anything, that is always stuck.

That Senate where they got 89 votes for a big bill the other night.
That Senate, where they usually get more often than you will ever know,
where they usually get 100 votes for most of the things they do. That is
the Senate. That is next in the rewrite.

(COMMERCIAL BREAK)

O`DONNELL: You saw the reports all year about partisan grid lock in
Congress, how nothing can get done? Then last week came the unsurprising
news that this was the least productive Congress since the 1940s, based
simply on the number of bills past. Then, when east cost new year`s eve
parties were beginning to wind down around 2:00 a.m. on January first,
there was this huge breakthrough in the United States Senate.

(BEGIN VIDEO CLIP)

SEN. PATRICK LEAHY (D), VERMONT: The yes are 89, the no are eight, 60
vote threshold having been achieved, the amendment is d passed.

(END VIDEO CLIP)

O`DONNELL: A truly bipartisan vote in the Senate. And it was the
vote to raise income tax rates. Forty Republicans voted for the bill.
Some of those Republicans had never voted for an income tax increase in
their lives. The last time any Senate Republicans voted for an income tax
increase was 22 years ago. And that was a tax increase brokered by a
Republican president. Only 19 Republicans voted for that George H. W. Bush
tax increase, more than double that voted for the Barack Obama tax increase
on New Year`s Eve.

This, in the institution crippled by the filibuster. This, in the
institution where nothing can get done. This, in the institution where 89
votes for anything had been impossible for many to imagine before New
Year`s Eve. Impossible to imagine only if you don`t know that most of what
the Senate passes gets more than 89 votes.

The secret truth of the Senate is that most things pass with 100
votes. But the Senate does that when the news media is not looking. They
do it out in the open. They do it with the c-span cameras rolling. It is
all reported in the congressional record. But no one notices.

Yesterday, on New Year`s Day, when the news media was chasing every
rumor in the House of Representatives, the Senate was quietly open for
business. So quietly that no one reported what was going on there. Many
of you were probably led to believe that the Senate was closed.

(BEGIN VIDEO CLIP)

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: If they tweak
something or change something it is going to have to go back to the Senate.

WOLF BLITZER, CNN ANCHOR: Are they even in town, those Senate
Democrats? A lot of them have left Washington, D.C.

(END VIDEO CLIP)

O`DONNELL: Yes, many senators, possibly most left town after the big
vote on the fiscal cliff deal. But one senator, one was still working. At
5:51 with the world focused on the House of Representatives lurching toward
the vote to approve, the Senate`s fiscal cliff deal, the majority leader
went to the Senate floor and said this.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NY), MAJORITY LEADER: Mr. President, I ask
unanimous consent that the Senate proceed to executive session following
numbers 870, 871, 878, 879, 911, 912, 913, 914, 915, 916.

(END VIDEO CLIP)

O`DONNELL: Now, that may look boring to you but that is the most
exciting moment in Senate history for number 916. And every other number
you just heard, and the pages and pages of numbers that Harry Reid went on
the read into the record, each one of those numbers was legislative code
for a Senate confirmation of someone appointed by President Obama. That is
right. The president who can`t get his nominees confirmed in a grid locked
Senate. Tell that to number 916, Angela Tammy Dickenson, who when no one
was looking, Harry Reid got confirmed as president Obama`s United States
attorney for the western district of Missouri. And what you just saw was
Angela Tammy Dickinson getting 100 votes for her confirmation even though
there was only one senator, one, on the floor.

Harry Reid, who every day does much more than most people in the news
media realize and definitely accomplishes much more than the news media
ever reports, pushed through pages and pages of nominations for President
Obama yesterday, when everyone was focused on what the house would do on
the fiscal cliff vote.

And Harry Reid did that with the active but invisible help of Mitch
McConnell, who did his part to make sure that no Republicans would vote
against any of those nominations. And what did the United States Senate do
today? That dysfunctional United States Senate? According to the news
media, absolutely nothing. Congress is closed down, nothing to report.
But at 5:03 today, Harry Reid was on the Senate floor doing this.

(BEGIN VIDEO CLIP)

HARRY REID: I now ask unanimous consent that the Senate proceed to
executive session and the help committee be discharged from further
consideration of presidential nomination 1304. And that the Senate proceed
a vote without intervening action or debate on the nomination, what we
consider, we consider made them laid on the table with no intervening
action or debate, and (INAUDIBLE) any statements related to this matter be
printed in the record and the president immediately be notified of its
action.

(END VIDEO CLIP)

O`DONNELL: How is that for drama? I love that, I could watch that
all day. That was amazing. That was Harry Reid getting 100 votes for
someone you have never heard of, Erica Groshein to become commissioner of
the labor statistics.

At the end of the year, and only the end of the year when labor
statistics became controversial for the very first time. You remember all
the crazy Republican attacks on the bureau of labor statistics when they
reported that unemployment was going down in final months of the
presidential campaign. Surely the next nominee to be President Obama`s
commissioner of labor statistics was in for a grilling in the Senate.
Surely her nomination would be filibustered. Someone would put a stop on
it and leave her stuck in confirmation limbo forever. But Harry Reid,
secretly, when no one was looking got together with Mitch McConnell, and
got Erica Groshein confirmed with 100 votes.

And while he was at it today, Harry Reid got us a new ambassador to
Kenya, and got him confirmed with a 100 votes. Career diplomat Robert
Godec is now our new ambassador to Kenya, a crucial posting at a crucial
time for that country with the troubles of its neighbor Somalia`s slipping
over the border and its stability threatened.

And while Harry Reid was at it he passed a little tax bill today. A
pretty small one but it is still a tax bill. One that would include flu
vaccines, within the definition of flu vaccines, trivial to you, but not to
the makers and consumers of flu vaccines.

So, what is the truth, is the Senate a hopeless dysfunctional place?
Does Mitch McConnell hate Harry Reid so much that vice president Biden had
to be brought in to negotiate the final terms of the senate fiscal cliff
deal? The answer is that the truth is complicated. That the news media
hates complications.

The news media crave personal drama. McConnell hates Reid, or Boehner
hates Reid. The news media likes screen writers, the last minute rescue by
the improbable hero, in this case Joe Biden. That is an easy story to
tell.

The truth is more complicated. Joe Biden could have accomplished
absolutely nothing. And he more than anyone knows this, Joe Biden could
have accomplished nothing and he, more than anyone knows this, Joe Biden
could have accomplished nothing without the ground work being laid for him
by President Obama and Harry Reid and Nancy Pelosi. And Harry Reid knew
that Mitch McConnell needed his Republican senators to see him negotiating
directly with the White House at the last minute. Harry Reid and the two
former senators in the White House, Biden and Obama, knew that the
Republican Senate leader needed that elevation of his negotiating status to
help close the deal. Not so much with the White House but with his fellow
Republicans in the Senate.

And so, the egoless Harry Reid watched Joe Biden come in from the bull
pen and get well-deserved credit for helping to close the deal. And then,
Harry Reid got back to work, to the day to day work. The governing chores
that he does so well. Including making sure that the nervous staff of the
American embassy in Kenya, in this post-Benghazi period, when our embassy
staffs are especially on edge that they knew who their next leader was
going to be.

The majority leader of the United States Senate got back to work today
as he does most days with the full and sometimes invisible cooperation of
the minority leader of the United States Senate. And as usual, no one
noticed.

(COMMERCIAL BEAK)

(BEGIN VIDEO CLIP)

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

BILL O`REILLY, FOX NEW ANCHOR: Hillary Clinton, I guess she passed
out somewhere, is she unconscious somewhere?

ALAN COLMES, RADIO TALK SHOW HOST: Are you suggesting she faked a
concussion to avoid testifying on Benghazi?

O`REILLY: I don`t know where she is. Look. If she in the NFL, I
would let her play. But I think she could make a phone call.

(END VIDEO CLIP)

O`DONNELL: Secretary of state Hillary Clinton is out of the hospital
after being treated for a blood clot over her right ear, over the new
year`s weekend. Doctors say they`re confident she will make a full
recovery.

Joining me now is Karen Finney, MSNBC political analyst.

Karen, you worked for Hillary Clinton. And I got some news for you by
the way. I`m not sure if you were monitoring FOX News tonight, but I`m
just been told that FOX News reported that Hillary Clinton has been
released from the hospital without any discussion about whether she was
faking it tonight. I don`t know why.

KAREN FINNEY, MSNBC POLITICAL ANALYST: How shocking. I`m surprised
they -- actually Lawrence, they didn`t find a doctor who could you know
speak to the idea that it is possible to fake something like that, right?
I mean, it is disgusting. I mean, it is really disappointing that we have
come back to the conservatives. I mean, this is, you know, the one mean
they always come back to, and that is bashing Hillary Clinton. And I sort
of thought because of the fact she has done such an incredible job over the
last four years. She has been to 42 countries last year alone, that maybe
just maybe, beating up on Hillary Clinton was kind of, at least gone out of
style for the Republicans.

But clearly not. I mean, you know, anybody who knows her, Lawrence,
knows that she would not, not show up for a hearing, simply because of a,
you know, a stomach flu unless somebody told her you really can`t go. I
mean, this is woman who say I can go to that, and then, I will just come
right back to bed. I mean, this is a woman who works incredibly hard and,
you know, is somebody who always taking responsibility for the agency she
runs and for the work that she is accountable for.

O`DONNELL: Well Karen, we don`t have time. But I would have loved to
have shown a video anthology of Hillary Clinton testifying beginning with
her first testimony to the Senate finance committee on health care bill,
1993. Then, the ways and means committee, the same bill. She testified to
four committees at least in the house and Senate bill, under intense
pressure. She has done it. There is no more experienced congressional
testifier in the cabinet than Hillary Clinton. There is nothing she could
not have handled than that.

FINNEY: When she went up there to do that as first lady testify in
health care, let me tell you something, those senators were afraid of her,
because they knew that she knew more about the subject matter than they
even did. So there is no fear coming from this woman. Again, she
accepted, as Kathleen Parker pointed out, from the beginning she accepted
responsibility accountability. It is really quite shameful though that,
you know, FOX News as we know, they can dish it out, but they sure can`t
take it and they sure can`t admit when they`re wrong, can they?

O`DONNELL: Yes, I mean, that is the other great thing about this idea
of her testimony. She began any public discussion about this by saying
yes, I`m responsible. I`m the secretary of state. Those are my embassies.
That`s my job. That is how she began it. Now, what do you want to catch
her on?

FINNEY: That`s right. That`s right. Well, I mean, of course. And
you know, John Bolton, while he is also is saying that she has the
Benghazi flu, said, well, and she wanted to wait until a report was out
before she testified. So, we wanted the facts in from of her, really,
that`s the best thing?

O`DONNELL: Karen Finney, friend of Hillary Clinton gets tonight`s
last word. "The Ed Show" is up next.

END

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