Skip navigation

'Up w/Chris Hayes' for Saturday, January 5th, 2013

Read the transcript to the Saturday show

  Most Popular
Most viewed

UP WITH CHRIS HAYES
January 5, 2013

Guests: Jerrold Nadler, David Cay Johnston, Veronique De Rugy, Suzy Khimm, Oliver Stone, Peter Kuznick


CHRIS HAYES, MSNBC ANCHOR: Good morning from New York. I`m Chris
Hayes.

Venezuela`s vice president says Hugo Chavez will be able to begin his
next term as president on Thursday even if he`s too ill to attend the
swearing-in ceremony.

And the Centers for Disease Control says the flu outbreak in the
United States has started early. Boy, do I know it? It is now widespread
reaching 41 states and causing the deaths of 18 children.

But first up, my "Story of the Week." Lessons from the cliff. This
week, the president signed the American Tax Relief Act which restores
Clinton era tax rates for individuals with incomes above $400,000, extends
unemployment insurance for a year and postpones massive budget cuts for two
months setting up yet another countdown for yet another induced crisis.

Here I think the big lessons from the latest budgetary standoff
between the White House and Congressional Republicans. Lesson number one,
the so-called fiscal cliff was not a cliff. We intentionally avoided the
phrase "fiscal cliff" here on UP WITH CHRIS HAYES because it gave a totally
false sense of what the actual deadline meant for policy.

You cannot be a little off of a cliff or kind of off a cliff. You`re
on a cliff where you`re then falling and quickly dead in life was at the
bottom of the valley. And the idea embedded in the metaphor is that if
Congress and the president didn`t come to an agreement before midnight on
December 31st, America would fall off the cliff.

And yet, what happened was that Congress blew to the deadline and
instead of falling, the nation just stayed suspended Wylie Coyote-like for
a few days over deal was finalized and voted on. In other words, the
deadline wasn`t a real deadline and blowing through it did not matter.

And since that was the case, it was incredibly unclear to me why the
deal had to be passed through the lame duck 112th Congress rather than the
more progressive 113th, which we can be in just two days later.

Lesson number two, no one cares about the deficit. OK. Now, it might
be slightly hyperbolic, but the (INAUDIBLE) from this latest round of
budget (INAUDIBLE) is that the people in Washington who most claim they
care about the deficit don`t actually care about the deficit. For
instance, all of these people --

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, (R-OH) HOUSE SPEAKER: A national debt that has
gotten so out of hand, it sparked a crisis without precedent in my lifetime
or yours.

SEN. JOHN MCCAIN, (R) ARIZONA: Deficits that mortgage our children
and our grandchildren`s futures.

REP. PAUL RYAN, (R) VICE PRESIDENTIAL CANDIDATE: We`ve got to get
this debt and deficit under control. We`re not going to dump that issue.

SEN. JOE LIEBERMAN, (I) CONNECTICUT: I`ll keep doing everything I can
to get our economy moving forward and put our national debt under control.

SEN. JOE MANCHIN, (D) WEST VIRGINIA: If nothing changes, we`ll have
deficits every year for the next ten years, the next decade. No one can
tell me that we can sustain that pace.

(END VIDEO CLIP)

HAYES: All of those people you just saw invading against the deficit,
all of those people voted for a deal. And according to analysis from
Congressional Budget Office adds $3.9 trillion to the deficit over the next
decade. I`ve said this before and I`ll say it again until I`m hoarse, you
cannot make any sense out of what politicians in Washington actually do if
you take at face value their stated concern with the U.S.`s debt.

If you don`t believe me, look at this chart, this tracks the deficit
reducing effect that each subsequent offer made by the White House. What
you see as the White House negotiated with the Republicans, the party that
runs around yelling about fiscal discipline and dire warnings if you`re
returning into Greece.

As the White House negotiated with that party, the amount of deficit
reduction kept getting smaller until it ended up at less than half of what
was originally proposed. When politicians say the word deficit, what they
mean is something else entirely. Lesson number three, budget battles are
about power, not about ideology.

The main narrative of this battle was of an ideologically extreme Tea
Party bound House Republican caucus, forcing the country over the fiscal
cliff and refusing to in the words of Starbucks cups everywhere "come
together" to solve the country`s problems.

Well, look for a moment at the actual final deal that got passed and
it`s much harder to make out an ideological contour of it than it is to see
the winners and losers have a lot to do with who holds concentrated power.

So, 77 percent of American households will see their taxes go up
because the expiration of the payroll tax cut first proposed by Obama and
past last February. But this tax raised for the vast majority of wage
earners was basically a foregone conclusion the entire time that rarest of
things in Washington a totally non-controversial proposition. Even anti-
tax (ph), Grover Norquist, shrugged it off.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: OBAMA was the guy who said that this is a tax
holiday. Calling it a tax holiday kind of suggests they viewed it as
temporary. Holidays aren`t permanent.

(END VIDEO CLIP)

HAYES: Now, you might say, well, the parties to this deal were trying
to reduce the deficit and sun setting the payroll tax cut saved you at a
$100 billion. Well, yes. But then, Congress turned around and passed the
whole puzzle (ph) of so-called tax extenders, tax cuts, breaks credits, and
incentives for a variety of industries and interests that will cost almost
$68 billion in this year alone.

In other words, Congress saved money by allowing taxes of wage earners
to go up and it took 72 percent of those savings and turned around and gave
them a way to, among others, NASCAR to subsidize construction of
racetracks, Hollywood to subsidize film production, and of course, Wall
Street which maintained a massive $9.4 billion tax loophole called the
active financing exception.

What`s most revealing and fascinating is that all the back and forth
over the fiscal cliff and negotiations about top marginal rates and chain
CPI, these three aspects of the deal were never even discussed or
negotiated over. It was always a foregone conclusion. Wage earners were
also going to pay more in taxes while NASCAR and Goldman Sachs were always
going to get their tax breaks.

In Washington, it`s always the things not debated that are the most
dangerous. Do you want to find out what my panel thinks about my lesson
from the so-called fiscal cliff right after this.

(COMMERCIAL BREAK)

HAYES: Joining me now are Congressman Jerrold Nadler, Democrat of New
York, Suzy Khimm, a reporter at the "Washington Post," who covers the U.S.
economic policy. You can find her at the great Wonkblog, David Cay
Johnston, author of "The Fine Print: How Big Companies Use Plain English To
Rob You Blind," a Pulitzer Prize winning journalist, and Veronique De Rugy,
a senior wizard fellow from -- studies U.S. economic and budget policy at
the Mercatus Center at George Mason University.

It`s great to have you all here. All right. There`s -- I`ve been
gone. Happy New Year, everyone. Happy New Year to uppers at home. A lot
to talk about. I followed this largely on Twitter. Obviously, I was sick
with a fever in bed watching this unfold. I guess -- because I want to
start -- just sort of the headline takeaway. I mean, you -- I`ll start
with you congressman because you actually had to cast a vote on this thing.
You know, I will confide something to you.

The deal was struck between McConnell and Biden. It passed through
the Senate, what, 89-8, I think something like that, 89-12 (ph). And, they
went home. Senate said you do it. And then, it looked for a moment like
the House Republicans are going to balk (ph), and there`s this thing called
the Hastert rule which was initiated under Dennis Hastert`s speakership,
which is Republicans won`t bring a bill to the floor unless they have a
majority of the Republicans, right?

They`re not going to let it pass with essentially fifth year, sixth
year Republican votes and the Democratic. And I was hoping they would kill
it. I was hoping they would kill it. And I was actually curious to see if
progressives ala the T.A.R.P. vote would essentially end up in a coalition
of source with the Tea Party folks to vote the deal down, but that didn`t
happen. Nancy Pelosi delivered every vote, one of then being yours. Why
did you vote for the bill?

REP. JERROLD NADLER, (D) NEW YORK: Because it wasn`t a great deal.
It was better than the alternative, and the alternative was a massive
retrenchment of government spending which would have led to much higher
unemployment. That was the basic thing.

HAYES: You`re talking about the sequester cuts that were --

NADLER: The sequester and repeal of all of the Bush taxes at the same
time. Plus, the sequester. Plus, you would have had no -- extended
unemployment would have gone away. The doc fix, that is to say, Medicare
reimbursement rates would have gone down by 27 percent. So, a lot of
people wouldn`t have been able to get doctors.

And the alternative minimum tax with a great expand (ph) of the middle
class is better than the alternative. And I think we will look back on
this as either a good thing or a bad thing, depending what happens in the
next two months.

HAYES: Right. Let me ask you this question before I get all of your
thoughts on the deal. Why not -- I mean, what I said up there was, it
seemed to me that after we`d already gone off the cliff, right, off the
cliff, showing the fact that the cliff metaphor was bankrupt, why not just
wait until 113th Congress?

I mean, is it so important for Allen West and Joe Walsh to be able to
vote on this deal that we have to make sure that we pass something out of
the 112th? Why not wait for the 113th?

NADLER: Well, you could make a case for that. I wouldn`t -- you
know, I wouldn`t have opposed --

HAYES: You`re not calling the plays is what you`re telling me.

NADLER: Yes, number one.

(LAUGHTER)

NADLER: But number two, it`s certainly not a cliff. First of all,
understand the metaphor, most people thought, most people are probably
going to thought that this was something to do with the deficit, just the
opposite.

HAYES: Right.

NADLER: The problem here, which everybody admitted, was that if we
didn`t do something, we were going to --

HAYES: Austerity fiscal consolidate.

NADLER: Which means you`re going to reduce the deficit too far too
fast which would do (INAUDIBLE) hike unemployment and so forth. You could
have waited a few days. A few days later, you could reduce taxes
retroactively, et cetera. It wouldn`t have been -- it wouldn`t have hurt.

HAYES: David?

DAVID CAY JOHNSTON, SYRACUSE UNIV. COLLEGE OF LAW: If the herd is
going to go there, you have to go with the herd. So, I understand the
congressman makes perfect sense. But, yes, I think we`re much better off
with the Republicans haven`t tracked of trying (ph) to amend the bill which
would have met the end of it, because it would have led to a much better
discussion that I think we`re going to have in the next couple of months.

I think we`re going to have an awful discussion for the next two years
about the role of government and spending and we`re going to have a small
ideologically based group enhanced in their power enormously by the way
this was handled.

HAYES: Veronique, a lot of people on the right, I think, say, I saw
mixed opinions on the right, right? Some people endorsed the deal. Some
people came out swinging against it. Some people said, well, you`ve now
kind of put the tax issue aside and now we can focus on spending.

And some have said, you have managed to walk away from deals that
would have actually involved spending cuts because we know, Suzie, from the
reporting that was out there that there were spending cuts on the table
that were offered, right? Where do you come down on that?

VERONIQUE DE RUGY, GEORGE MASON UNIVERSITY: Well, I mean, I find it
really terrible that, actually, there were absolutely no spending cuts in
that deal, but I`m not surprised, because when you look at the dynamic and
it`s been going on for a long time, Republicans have the worst record on
spending.

But I will take issues with your chart at the beginning showing the
deficit reduction and how, you know, Republicans refused to vote against
bigger deficit reduction deal. I will say that Democrats, I think, have
extremely weak knees in spite of everything they say about raising revenue
when it comes to actually really raising revenue.

HAYES: Absolutely agree.

SUZY KHIMM, WASHINGTONPOST.COM: I would agree with that. And I mean,
I think what`s interesting about this bill is not so much what it does as
what it doesn`t do. It doesn`t reduce the deficit, you know, barely at
all. It doesn`t really deal much with growth on economy creating jobs, I
mean, and create some cushion for the unemployed but doesn`t really deal
with that.

It doesn`t take advantage of the fact that we have interest rates so
low, and we can borrow very cheaply right now, which is one of the
president`s priorities. But basically, you know, the reason that folks on
both left and right are dissatisfied with this is that it really was a
(INAUDIBLE).

You know, as Congress mentioned, we avoided the absolute, you know,
sort of worst austerity all at once, but we really didn`t make much
progress on anything else, and this debate is just going to get kicked down
for weeks and months to come.

NADLER: I think also one of the problems is that the debate is skewed
way to the right. The fact that the president advised (ph) into the
necessity of cut spending right now. We should not be cutting spending
right now. Our problem is not the deficit. That`s a long-term problem.
Our short-term problem is high unemployment.

Right now, we should actually could be increasing spending. We should
borrow more money at negative interest rates which means they`re paying us
to take our money and spend in our infrastructure and put people to work,
et cetera. And we`re not even hearing that side of the debate.

JOHNSTON: And that goes to this fundamental underlying problem going
on, I believe, and that is, it`s reacting to the idea that somehow we have
to cut spending which really means cutting spending that the middle class
and working class people, instead of having an agenda and saying, no, this
is our agenda. Stop playing defensive ball. Get on -- go on the defense
and Obama is --

HAYES: What do you mean by that, have an agenda in terms of
affirmatively what you want to spend money on?

(CROSSTALK)

JOHNSTON: These are things we need to build a society --

HAYES: The president leaves that out in every speech.

JOHNSTON: Say that again?

HAYES: The president leaves that out in every speech. Every single
speech of the president, these are investments of the future. We need to
be --

(CROSSTALK)
NADLER: -- we have to have major spending cuts.

HAYES: Yes.

DE RUGY: I mean, I would like to kind of put to rest this idea that
sequestration is going to bring devastating cuts. It won`t. When you look
at CBO projections of the impact of sequestration cuts on the growth of
government spending, basically, it`s a cut, with the exception of the first
-- it`s a cut and even that is very minor.

The cut to the growth of spending. These are not devastating cuts.
And it`s also nothing that actually --

HAYES: I disagree.

DE RUGY: -- will address --

HAYES: Let me say this. It`s true that it changes the growth.
You`re right. But right now, we are dealing -- if you look at the Budget
Control Act, which is, of course, the piece of legislation that came out of
the debt ceiling deal, right? And then, you look at what just happened in
the American Tax Relief Act, which is great name, those two together give
you fiscal consolidation at around 1.9 percent of GDP.

That`s European levels of austerity. Brad Blumer (ph), actually, your
colleague at one blog, made this point. He ran the numbers on this, right?
So, we`re actually right now short of sequestration already between the
taxes and the cuts that are in place in the budget control act. We`re
already looking at a European level of austerity.

(CROSSTALK)

NADLER: And if you look at discretionary spending, that is to say
non-entitlement spending --

HAYES: Right.

NADLER: You project it from about 2010 to about 2022 under the
president`s plan. We`ll go from 3.1 percent of GDP to 1.7 percent. The
Republicans want to go to 1.5 percent. That is ridiculous in both cases.

HAYES: Veronique, I want to give you a chance to respond to this --

DE RUGY: You look at the projection, spending is growing throughout
the period. So, I mean, sure, if --

HAYES: Right, because the economy`s growing.

NADLER: And the population is growing.

HAYES: And it`s getting older (ph).

DE RUGY: But I mean, when you look at -- whether it`s -- I mean,
discretionary spending, even defense spending under -- with the exception,
as I said, over the first year, defense spending will continue to grow and
that is after defense spending grew by 70 percent in real terms over the
last ten years.

HAYES: Totally agree. There`s a few wrinkles in the guts of this in
terms of taxes that I mention that I ever mentioned that I want to talk
about. The payroll tax. I`m just amazed at how no one seemed to fight for
the payroll ax, "A." The tax extenders and the estate tax give-away which
just is absolutely mind-boggling. All of that right when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The last thing middle
class families can afford right now would be to pay upwards of $2,000 more
in taxes this year. And thanks to so many of you, because you`ve made your
voices heard drought this debate.

We stopped that middle class tax hike. Republicans in Congress said
they`ve never agreed to raise tax rates on the wealthiest Americans. We`ve
now raised those rates permanently, making our tax code more progressive
than it`s been in decades.

(END VIDEO CLIP)

HAYES: That was the president on Wednesday announcing the deal
basically, taking a little victory lap on it. But -- the reporting out of
this was all about stopping the middle-class tax hike. But people -- you
make money, if you`re a wage earner and you`re watching this show, you`re
going to get your first paycheck. Your paycheck will be smaller.

And the reason it will be smaller is because there was a two percent
payroll tax holiday this past year that has expired. Now, there are
reasons that people didn`t like the payroll tax holiday. But I am just
amazed that no one fought for this damn thing when you consider the fact
that, apparently, raising taxes on the middle class is the worst thing
anyone can do.

Everyone loves tax cuts. Here`s a great little detail about this I
thought was so fascinating. I was like where`s Grover Norquist on this?
Norquist could not care less about the payroll tax cut expiring. And then,
we went and looked to the Norquist tax pledge and the Norquist tax pledge
doesn`t mention the payroll taxes at all.

You can vote to increase payroll taxes and be fine, but the tax pledge
is opposed any and all efforts to increase the marginal income tax rates
for individual and/or businesses, and two, oppose any net reduction or
elimination of deductions and credits unless matched dollar for dollar by
further reducing tax rate. Why did -- how did this happen?

KHIMM: The interesting thing about the missing payroll tax cut debate
is that Obama, himself, gave it up voluntarily. During the negotiations,
before everything kind of fell apart with Boehner, he dropped it, you know,
in his third offer. The stimulus that he had been offering including
unemployment benefits and so forth, he decided to drop it.

And then, it was a foregone conclusion weeks ago, even before he
reached the sort of the crisis point in terms of the negotiations back and
forth.

HAYES: But why wouldn`t -- OK. So, the president drops it. Why
doesn`t -- why don`t Democrats in Congress make us think about it and why
don`t Republicans like cutting taxes? I honestly, what is the deal?

NADLER: The Republicans never liked the payroll tax holiday, in the
first place. The Republicans have always been against the tax rates below
in middle income people, and there were a whole bunch of them last that
they were opposed to. I don`t remember what they are at this point.
Democrats, some of us did raise our voices against that.

The problem is, you had a two-front war because we were opposing the
president on the chain CPI and effort for a time on the possibility of
Medicare breaks. You can only fight so many wars at the same time with
your own president.

DE RUGY: I`ll say, you know, politicians always want to go for the
low-hanging fruit. And, you know, the change in the C.O.L.A. is a low-
hanging fruit and pretend into or form (ph) entitlements, and the payroll
taxes also, one of those low-hanging fruits.

But more importantly, I actually think it is the right thing to let
the payroll tax go up, especially if you`re insistent on the idea that the
American people are actually paying into the payroll -- into its Social
Security --

NADLER: That`s a very important point. And some of us never liked
the payroll tax --

HAYES: Yes, so explain why -- basically, there were never any fans of
this thing. So, it was basically orphaned and now --

NADLER: It shouldn`t have been eliminated, but it shouldn`t have been
substituted for this. It shouldn`t have been an equal tax cut on low and
moderate-income people. We always say that the Social Security, CPI,
whatever should not be on the table as far as the deficit discussion.

Social Security has nothing to do with the deficit and that is
basically true. However, when you put in this payroll tax holiday, you
took a $110, $120 billion a year away from Social Security trust fund, and
you substituted a direct check from the treasury --

HAYES: From the general fund into the trust fund.

NADLER: And that robs you of the ability to say that Social Security
has nothing to do with the deficit. So, we wanted to get rid of the
payroll tax cut to restore our ability to protect Social Security, but we
should have substituted something like the make or pay tax credit in an
equal --

JOHNSTON: -- expire raise taxes on the low income (ph) America.

HAYES: Right. The make or pay was part of the recovery act. It was
incredibly --

NADLER: But expired. And the payroll tax credit was a substitute for
it. The Republicans wouldn`t allow them to make --

(CROSSTALK)

JOHNSTON: I didn`t get the payroll -- the making work pay credit.

HAYES: Right.

JOHNSTON: Chris, you probably didn`t get it.

HAYES: Right.

JOHNSTON: But we got a huge tax cut during those two years my wife
and I because we both pay the maximum tax.

HAYES: Right.

JOHNSTON: And that`s an upside down and dumb way to do this.
Remember, the Republicans are not adverse to raising taxes despite with --
they retroactively raised them on teenagers in 2006. They took away
Obama`s making work pay credit which people at the bottom, anybody who made
under 20,000 single or 40,000 married got a tax increase.

HAYES: Right. And this gets some ideology point, right, because it`s
just -- none of this stuff makes sense if you`re looking at this. Oh, this
is all ideological zealotry. It is about power because teenagers don`t
have a lot of power and working people.

(CROSSTALK)

KHIMM: And if there`s one thing that the congressman brought up, I
think, that`s important to remember is that by letting the payroll tax
holiday expire. That took $110 billion out of people`s pockets, more or
less. That`s about the same amount that the sequester would have hit us
this year in 2013, these awful cuts that would have too much fiscal
contraction.

So, on the one hand, OK, we kept the sequester from happening, at
least for a couple of months. On the other hand, we`re still getting hit.
The money is still being taken out for another thing. So, if the sequester
is so bad because it takes this money out of the economy, why are we
taking, you know, -- by that law --

(CROSSTALK)

DE RUGY: I want to ask you guys all a question, like, after the
gigantic increase in defense spending, you are all opposed to the cut in
the defense budget?

(CROSSTALK)

HAYES: I don`t think anyone is.

(CROSSTALK)

KHIMM: By the logic that if you`re arguing that, you know, as
Democrats and Republicans both agree, they agree the sequester is bad. So,
if you`re going to take that money out of the economy --

HAYES: You`re saying if the problem is fiscal consolidation and
that`s what you`re worried about --

KHIMM: If the problem is fiscal consolidation, then why are we -- you
know, if that`s what they say they`re going to do, why are they acting
against that?

DE RUGY: There`s always a disconnect between what they say, whether
Republicans or Democrats, and I totally agree with you thinking about this
whole thing in terms Democrats believe in this and Republicans believe in
this is the wrong way to go about this.

HAYES: Well, the place where that`s most evident to me are the tax
extenders, because it`s hard to find like -- you know, there`s not a long
left tradition of Hollywood subsidies and NASCAR subsidies to read into or
Hayek didn`t write a whole ton about active financing exceptions.

So, that`s a much more of the sort of dirty muck of politics, and I
want to talk about the tax extenders, also the distribution, and the estate
tax thing which I promise the last time around which we`re going to get to,
because, to me, is just an absolute giveaway. Right after this.

(COMMERCIAL BREAK)

HAYES: We`re talking about the deal that came out of the fiscal curb,
the so-called fiscal cliff. Luckily, we`re not going to have to refer to
it anymore, so we won`t have this nomenclature confusion. The tax
extenders part of it I think was that kind of hidden story. And basically,
David walk our audience through what tax extenders are.

JOHNSTON: It just means that a special interest favored out there
that you`ve continued. So, in the case of NASCAR, these guys want to write
off their investment on the stadium and the road that they built, not in 15
years or 38 years but on seven.

HAYES: Right.

JOHNSTON: That means they get better cash flow immediately.

HAYES: Right. This is advancing a depreciation schedule which can be
massively lucrative.

JOHNSTON: That`s right. That it makes your investment much more
lucrative. And, there`s no justification for this -- for NASCAR. I mean,
what does the compelling public need that we have to give this tax break --

(CROSSTALK)

JOHNSTON: -- like this in circle. It makes no sense. There are
plenty of compelling needs and this is where you talk about. It`s about
power. It`s about the terrible campaign finance system we have that starts
our politics. And it has nothing to do with good economic policy, good
public policy on any level.

HAYES: The thing that drives me crazy about the tax extenders, too,
I`ll say is because a lot of -- most to them are one-year sunset. There
are some of them are two, some of them in 10, but they`re all -- they don`t
get the ten-year budgetary scoring, right? So, everyone says, well, this
is going to cost $68 billion. Well, that`s just one year. So, if they
keep doing this every year, you wipe out every little -- every bit of the
savings gets wiped out from the --

JOHNSTON: And it`s the government picking the winners and losers.
It`s very important. If you want to talk, as the Republicans (ph) about a
market economy, then let`s have a market economy. Let`s not have corporate
socialism, and that`s what this is about. This is corporate socialism.
This is, we will privatize gains, socialize losses, and subsidize these
enterprises. And NASCAR racing (ph), we need to subsidize?

HAYES: But people like NASCAR is.

KHIMM: I would say that there are some things -- I mean, basically,
all the tax extenders what got passed the very last minute had been put
into a Senate bill in a committee months and months and months ago.

HAYES: Right.

KHIMM: So, this had kind of been settled and they`re like, oh, OK,
last minute. We`ve got to pull that out of there. I mean, the things that
are in there that have broad public support, the research and development
credit is something that both Democrats and Republicans say they would like
to encourage businesses to subsidize their R & D. That`s actually been
extended, I think, at least 14 times up until then.

HAYES: Right.

KHIMM: I mean, this isn`t even from businesses that profit from this.
This isn`t actually the way they want it --

HAYES: Yes. We should be really clear. This is a continuation of
the status quo. There`s nothing in that package --

(CROSSTALK)

HAYES: And sometimes, what I love is the retroactive extension,
particularly, the retroactive extension of a tax policy design to
incentivize future behavior, right, which of course you cannot do, right?

So, the problem with the tax incentive lapse, right, and the whole
idea of an R & D, for instance, an R & D tax incentive, right, is to
incentivize people to spend more money on R & D. But if it lapses and you
have an 18-month period in which it doesn`t exist, it is impossible to
retroactively incentivize the people go back in time and start investing
more in R & D.

JOHNSTON: And by the way, there`s some evidence that what`s called R
& D really isn`t R & D. Let`s be clear that this is wildly accepted by
Republicans and Democrats and there`s a community supporting it. I don`t
think it`s pretty (ph) tax policy.

DE RUGY: The other thing that`s evident when you look at the data is
that the big beneficiaries for all the talk by the president about, you
know, being, you know, anti very rich people is actually really high become
business earner. You look at the --

HAYES: You`re saying out of tax extenders?

DE RUGY: Yes. Absolutely. But you know, most business subsidies,
when you look at them, I mean, when you look and you look at who is
actually benefiting from them, they`re usually large, well-established
company that actually do not need this type of support from the government
and shouldn`t get it.

HAYES: Speak up for corporate socialism.

(CROSSTALK)

NADLER: I agree with this mostly. I`m against most tax expenditures.

HAYES: Right.

NADLER: But some make sense. For example, the wind and --

HAYES: The wind tax credit which got extended.

NADLER: The wind tax credit which got extended. You want, in new
industries, you want to promote -- now, there are only two ways of doing
this, by the way.

HAYES: Right.

NADLER: You could simply appropriate money and say this company gets
some and that company gets some by act of Congress.

HAYES: Right.

NADLER: People don`t want to do that.

HAYES: Right.

NADLER: For obvious reasons. The other way to do it is by saying if
you meet certain requirements, you get a tax break or something. And
sometimes, they`re useful (ph). Now, we way overdo it, no question. And
when we do it, we do it to some extent, because the campaign --

(CROSSTALK)

JOHNSTON: The problem with the wind tax credit is, it`s not part of a
comprehensive strategy.

NADLER: I agree.

JOHNSTON: So, we are now providing extra-high returns for building
certain kinds of transmission lines, but we don`t -- aren`t taking care of
other needs --

(CROSSTALK)

NADLER: Of course, we do. Of course, we do. But in the absence of
it, this is better than --

HAYES: You`re in the well of the house, you got to build before you -
-

DE RUGY: Can I clarify something? I mean, the wind tax credit, in
one form or another, has been around for over 20 years. Over 20 years.
This is not --

HAYES: It lapsed for a few years, actually.

DE RUGY: It lapsed for a few years, which, by the way, makes these
extremely inefficient. As you`ve said --

(CROSSTALK)

DE RUGY: But more importantly, when you look at who`s benefiting from
the wind production, -- yes, I mean, it`s unbelievable. These guys are
double-dipping like crazy.

(CROSSTALK)

NADLER: Most of our tax expenditures, the tax rates and so forth, are
unjustified. However, I would support wind renewable because we have to
get that as a larger proportion.

(CROSSTALK)

NADLER: Yes.

HAYES: Yes, but hold this thought --

NADLER: Because we have to get that as a larger fraction of our
energy. We`ve got to get away from fossil fuels, global warming and
everything else. And if it`s not the most efficient way of doing it, it`s
still the best way --

HAYES: It`s a sort of third, fourth best solution. But you raise a
point that I think I want to talk about next which is the distribution of
all of this, right?

I mean, because the campaign was about tax fairness, I mean, the
presidential campaign, very explicitly about tax fairness, there`s a head
line in "The New York Times" today, good piece by Annie Lowrey, who`s been
a guest on the show reported there saying we now have the most progressive
rate structure we`ve had probably since the Carter years.

So, I want to take a deep dive if this sort of what is the
distributional effect of all this. This is really about fairness. How
fair -- have we stepped in the right direction in fairness right after this
break.

(COMMERCIAL BREAK)

HAYES: All right. If it`s Saturday morning, it`s tax policy here on
UP, and we are talking about the deal that was struck this past week to
avert the so-called fiscal cliff. I want to give people a sense of the
size of the tax increase that we`re talking about. It`s about 0.2 percent
of GDP. Now, 0.2 percent, take a look at this for some historical
comparison.

The big tax rate that Ronald Reagan did in 1982 was one percent of
GDP. If you look at the first Clinton budget which was we remember as a
kind of iconic moment of raising taxes, that was 0.6 percent of GDP. So,
this is in the historical sense quite a relatively low amount of tax hiking
in a historical perspective of other tax raises in recent history.

And then, I want to look at the distribution, because this to me, as I
said, before we went to break, is a big question, right? I, you know, I`m
an egalitarian leftist. I want to see a more equitable society. And one
of the big items on the agenda in this campaign was the fact that we needed
more tax fairness. We have rising inequality.

We have a set of tax cuts passed under George W. Bush that were
massively upwards re-distributional in their effect. So, here is the
percentage of tax cut by income level. This is computed by Citizens for
Tax Justice. Now, the sort of hilarious thing about this is, those people
making $129,000 a year got a three percent tax cut.

Those making $279,000 got a three percent tax cut. Those making 1.5
million got a 1.2 percent. So, there`s this weird distributional wrinkle
that happened in the negotiation which is that, basically, John Boehner and
the Republicans fought for people making $300,000 and $400,000 a year, and
they ended up with the big -- the best deal out of this, where the folks at
that point.

But this is just the income stuff. There are also the effects of the
estate tax and the fact that carried interest state (ph). I mean, that`s
the things to me that so crazy. Will you break down what happened in the
estate tax, David?

JOHNSTON: Well, we raise the estate tax limits which were in the high
600,000 range in the late 1990s to $5 million per person under Bush, but
it`s important to understand that that`s just a nominal number. Taxpayers
up there will show you how to push $100 million, $200, 500 million through
without paying any tax because of all these other rules out there.

Mitt Romney and his wife at a time you could only put $1.2 million to
your children created a trust that was $100 million. You put in something
you know has little value. And then as a private equity manager, in view
it with value after the deal, and suddenly, 1.2 becomes a billion.

I do think that we need to recognize that because we expect people to
save for their retirement now that is owned their retirement assets instead
of getting a pension, but you have to adjust the system for that. But the
system is so porous and meaningless (ph). And most of the gains have never
been taxed. Fundamental issue, most for the gains in the states have never
been taxed.

HAYES: The headline takeaway, I had the estate taxes. There is --
the White House wanted the estate tax to go back to the 2009 levels and the
Republicans fought for 2012 levels. And the difference between those
amounted to a million bucks per heir. That was the difference. So, in
this compromise, every heir out there who has the tragic and sad loss of
their parents, their very wealthy parent, is going to see a million bucks
more -- a million --

JOHNSTON: Nominally.

HAYES: Nominally.

KHIMMY: I mean, what`s so interesting about the estate tax that the
cases (ph) that were in the deal is that it`s also $5 million per person
point at which about that, you know, your tax is adjusted for inflation.

HAYES: Great point.

KHIMMY: That means that each year, that`s going to go up and up
permanently. And I mean, it`s interesting. I think the Tax Policy Center
did analysis, you know, you have even Democrats saying that, OK, folks with
family farms with, you know, these sort of big assets that pass them on to
their children are going to be punished.

They found that in 2012 about 40 small businesses and family farms
would be subject to any estate tax at all, and that level was preserved.

JOHNSTON: I`m still looking for that family farm that was lost, you
know, for the Bush administration couldn`t produce a farm 11 years ago or
12 years ago.

HAYES: Oh, that`s right.

JOHNSTON: And I`m still looking for it, the mythical farm.

DE RUGY: Can we go back to your incumbent equality point?

HAYES: Yes.

DE RUGY: I think there is something that is often lost in this
debate. In the quest for reducing incumbent equality, I mean, what I
mostly care about is income mobility.

I think this is what matters to low-income Americans is like the
chance to actually go up, but in the quest for income equality, the idea
that`s making the tax code more progressive is the way to go is I think is
wrong. I mean, the U.S. when you compare to other country that have less
income and equality is actually has a very, very progressive system. So --

HAYES: Well --

DE RUGY: You can actually question --

HAYES: It has a progressive -- let me just clarify.

DE RUGY: Yes.

HAYES: It has a progressive rate structure and rate schedule. It has
nominally a very progressive rate schedule. The actual tax system is not
that progressive --

(CROSSTALK)

DE RUGY: If you have the state level, then that`s different, but at
the federal level because that`s what --

HAYES: Yes, at the federal level, the officially posted rate
structure.

DE RUGY: -- a comparison, looking at not just a share paid by the
top, but they have a progressivity index, and actually, the U.S. has an
extremely progressive tax system compare to European country that has less
income and equality. So, it`s not --

HAYES: Well, I have a million thoughts on this, and I know all of you
do and I want to respond because I`ve spent a lot of time thinking about
this. Let`s talk about progressivity right after this.

(COMMERCIAL BREAK)

HAYES: All right. So, here, we`re talking about tax progressivity
and equality more broadly and specifically about the deal that was struck
to avert the fiscal cliff. Here are my thoughts in short order. One is
that, look, this was a step in the right direction in terms of
progressivity. It restores a rate schedule that is as progressive as it
has been since the Carter years.

It increases capital gains, the capital gains rate on people that
limits deductions for people at the high end of the scale. There are
people at the top who have gotten 92, 93, 94 percent of the total wealth
gains just in the recovery. I mean, forget about the last 30 years, right,
are going to pay more.

There are still all sort of ways in which the tax system is totally
rigged and corrupt, as we mentioned. And those ways in which its rigged
and corrupt to which aren`t, in some senses, necessarily even ideological
do have distributional effects that cut against whatever progressivity we
have in the official posted rate schedule, first of all.

Second of all, this point about equality, I mean, this is a much
broader conversation that we should continue to have, which is we have the
growing inequality and what do we do with it? Now, there are some people
who say don`t worry about inequality, don`t worry about mobility which is a
sort of the point you`re making.

And I think two things I want to say about that is one is there`s a
lot of evidence that suggests that you can`t separate the two. That in
fact, rising inequality is bad for mobility. And in fact, one of the
president`s economic advisers called this the Gatsby curb which is when you
plot these two things against each other, when you have rising inequality,
you also have declining mobility, then I think there`s a lot of evidence to
suggest that`s the case.

So, if you care about mobility, you don`t get to just sort of cordoned
it off. But to go to the point that you made that I want to agree with is
that, yes, if you look at the countries that are most equal, right, the
thing that makes them have reduced inequality isn`t the progressivity of
their tax system. What it is is taxes as a share of GDP.

You line up the OECD countries on one side and you rank them by how
equal they are. You line them up on the other side and you rank them by
what percentage of their -- what share of GDP and taxes they pay. And what
you see is, everybody`s paying taxes, and everyone is sharing universal
benefits, you have more equality.

And that vision of universal pain and universal benefit is something
that I think the Democratic Party has walked away from in favor of things
more like targeted redistribution through earned income tax credit, et
cetera, as opposed to we all pay in and we all take out which is the sort
of recipe for success of Social Security. I`ll let you respond. Yes,
please.

DE RUGY: I mean, I just want to say that the Scott Winship and the
Brookings Institution has actually very effectively pushed again this idea
of --

HAYES: I know.

(CROSSTALK)

DE RUGY: But again, that`s not my area of expertise, so I certainly
won`t talk for him. But I think there`s actually a lot of debate to be had
on this issue. I mean, I`ll agree with you on, basically, with the rest.
And I do think, though, that mobility really matters. And again if you
want to actually improve mobility, I think that, you know, investment in
education, regardless whether (ph) it`s through the public sector is
actually really cheap.

HAYES: Suzy.

DE RUGY: Without tax (ph).

HAYES: If you want to respond --

KHIMMY: Yes. No, I mean, if you want to look at the distribution of
this deal, there`s one statistic that really just stands out to me which is
tax policies under -- which is that if you look at income tax, 0.7 percent
of all taxpayers will see a rise in their income tax. I mean, they pay a
lot so their taxes will go up a lot, but that is a tiny percentage of
taxpayers that, you know, that are going to see higher taxes and get more
revenue from.

You know, what`s interesting about the distribution is what you see
not just with the middle class and the poor, but I guess what I think the
New York public Alec McGinnis (ph) called the Bethesda bubble. The
Bethesda, Maryland being the sort of well-healed suburb of D.C. that if you
look at those earning between $200,000 and 500,000 --

HAYES: Yes. They were the real winners.

KHIMMY: They were the real winners of this -- I mean, based all a one
percentage point rate height if you look at all the tax effects of the
deal, that`s the same as those earnings between $10 and $20,000. So, they
-- you know, because ultimately, the deal defines them as being middle
class really got off, you know, very well for themselves in this deal.

JOHNSTON: You`ve got some of those folks in your --

(CROSSTALK)

(LAUGHTER)

NADLER: And that was part of the debate between the president wanted
250 and the Republicans who eventually forced it up to 400 or 450. There`s
no question about that. What I was going to say is, if you`re talking
about -- we have found -- it used to be that as productivity increased, so
did wages.

HAYES: Right.

NADLER: And we now know that this has gone sharply different in the
last 30 years, essentially since Reagan started changing all our policies.

HAYES: Right.

NADLER: So, that productivity goes up and the benefits of the
productivity go to the very top of the income scale, not to wages, not to
the middle class, number one. Number two, mobility, we are now -- have a
less mobile society than most industrial countries. We used to --

HAYES: Actually, the mobility of decline over time, although, if
Scott is watching this, I`ll note that he`s at the center of this, "A." and
"B," mobility actually proves to be something extremely difficult to
measure just --

NADLER: But nonetheless, it is clear that it`s gone way down and real
low within most other --

DE RUGY: And there`s no doubt on mobility --

NADLER: And there`s also no doubt that one of the reasons for that is
that we`ve made it practically a felony to try to organize a union in the
private sector.

HAYES: That`s right.

NADLER: And that`s clear when you see the destruction of union power
and the growth of corporate power.

JOHNSTON: That`s the biggest reason --

HAYES: But David, you were the pre-eminent tax reporter in the
country and still are. And you work on your time (ph), you cover this
actual -- your take away from this deal in terms of this progressivity
spectrum, step in the right direction or not?

JOHNSTON: No, not really step in the right direction. Just minor
tweaking. But look --

HAYES: Because it`s not big enough?

JOHNSTON: Well, not big enough, but why are we starting at $450,000
and saying everything above that. We have people in this country with
billion dollar -- we have people with annual salaries over $50 million a
year. They`re paying the same rate as --

(CROSSTALK)

JOHNSTON: Yes. $450,000. We need to have some higher rates on these
higher incomes to capture the --

NADLER: I should point out, I introduced the bill in September to
eliminate the sequester and pay for it by doing two things, number one,
accelerate the withdrawal from Afghanistan, and number two, put higher
income tax rates on a million, two million, five million, 10 million, and
so forth.

HAYES: Add new brackets.

NADLER: New brackets.

(CROSSTALK)

HAYES: One of the things people should know about the way that
American inequality and actually global inequality work is that it has this
kind of fracto nature in which actually it`s not just the one percent, it`s
the top to one percent and top 100 --

(CROSSTALK)

HAYES: -- that if we get more and more gain. And so, it`s not
written in stone anywhere that you can only have five brackets or six
brackets. In fact, we have the calculus software now that you can just,
you know, graph it along one curve. We`ll talk about the debt ceiling and
the trillion dollar coin right after this.

(COMMERCIAL BREAK)

HAYES: Hello from New York. I`m Chris Hayes.

With me this morning, I have Congressman Jerry Nadler, Democrat of New
York; Suzy Khimm of "The Washington Post"; David Cay Johnston, author of
"The Fine Print: How Big Companies Use Plain English to Rob You Blind"; and
Veronique De Rugy of George Mason University.

We were talking about the deal that was struck between Congress,
congressional Republicans, congressional Democrats and the president of the
United States to avert the so-called fiscal cliff and we pick through I
think some of the fine print, if you will of the deal.

But I want to talk about what this sets up next because I think the
big criticism from Democrats and liberal observers wasn`t necessarily what
was in this deal, but the fact that because there`s no debt ceiling raised
in it and because it pushes the sequester two months ahead of time that
you`ve now set up yet another countdown clock cable news crisis basically
where we`re going to head rush long to this deadline. And that the
Republicans are going to have much more leverage here because they`re once
again threatening not to raise the debt ceiling unless they get spending
cuts.

And I guess my question to you, Congressman Nadler, is you have a
proposal -- it`s not yours. It`s actually emanated and this probably will
make people a little worried about it. It emanated from a commenter on a
blog. But it is, I think, pretty sound, actually.

Explain your proposal, the proposal that`s out there that you are now
advocating.

REP. JERROLD NADLER (D), NEW YORK: You put it in context first.

HAYES: Yes.

NADLER: The Republicans have suddenly invented this notion that we
bargained about raising the debt ceiling, and if you have to reduce
spending to justify -- in order to get their votes for increasing the debt
ceiling. The president said he won`t negotiate on that, and he`s quite
right. What they`re really saying is by not raising the debt ceiling,
we`re not going to pay the bills that we voted to incur.

HAYES: Yes.

NADLER: We`re going to permit the country to default and cause
economic chaos and destroy the country. That`s essentially what they`re
saying, and they`re saying, we`re going to blackmail everybody in the
country by saying we`ll destroy the economy if you don`t do what we want,
namely cut spending in certain amounts.

Absolutely illegitimate. It`s like an old gangster movie where
someone says, nice economy you got there, it`s going to blow up if you
don`t pay me protection money. That`s what they`re saying.

It should not be indulged. But there are two ways of simply saying
we`re not going to talk about it. One is to say that under the Section 4
of the Fourteenth Amendment, which says the full faith and credit of the
United States shall not be questioned, that in so far as a debt ceiling
statue prevents you from paying the bills, that is unconstitutional and
should be disregarded. The president for some reason said he won`t do
that.

I`ve seen very good congressional arguments on both sides of that
question. It`s never been tested in court. It should.

HAYES: It`s not clear who could even test it actually. It`s sort of
fascinating issue.

NADLER: The other question is, that there is a way, it sounds
strange, but it`s not. It`s no more strange and certainly no more --
certainly a lot more justifiable than blackmailing the whole country by
threatening the economy. And that is that the Treasury has the authority
under specific statutory authority to issue platinum coins in any
denomination.

HAYES: Denomination -- from time to time.

NADLER: From time to time.

Anytime the treasury secretary wants to do it, in any denomination he
wants to do it.

So, what you do is, you take a platinum coin. You put John Boehner`s
face on it. You mint it. You say it`s a trillion-dollar coin. You put it
and you give it to the Federal Reserve.

The Federal Reserve can then --

HAYES: You deposit it in the Treasury`s account in the Federal
Reserve. You fill out a little deposit slip right at the teller window --

NADLER: And then the Treasury can pay its bills. Now, you`re not
increasing borrowing. You`re not borrowing anything.

HAYES: Right.

NADLER: You`re not having inflation because you`re not spending more
money. You`re still spending the amount of money that Congress voted to
spend.

HAYES: Right.

NADLER: So, there`s no downside to it. Now, is it a legal trick?
Yes, it gets around the legal trick and the blackmail of the debt ceiling.

HAYES: If there are any Hollywood agents watching, I am working on a
trillion-dollar coin heist film which would be super awesome, which is
about the trip to the Federal Reserve.

(CROSSTALK)

HAYES: Find my e-mail address.

NADLER: The point is it`s a legal way of taking the blackmails away
from whoever wants to use it.

HAYES: Yes.

NADLER: And then you can have an intelligent, or a proper debate of
your level of spending.

SUZY KHIMM, WASHINGTONPOST.COM: OK. This is -- I mean, I think it`s
a fun idea to think about. You think about Obama handing if you don`t want
to do Boehner, you could put Sandra Fluke`s face on it and give it to
Republicans.

I mean, the question is, and you have are various ways to bring this
up, is that, you know, there could be a lot of litigation around whether
this was actually the intent of the law. You know, you could say that
actually this was there so that we could issue commemorative coins with
Bruce Springsteen`s face on it.

HAYES: Right.

KHIMM: And not in order --

NADLER: As the general rule of statutory --

HAYES: Through interpretation, yes, exactly.

NALDER: The general rule of statute interpretation when you have very
specific language that says you may do this, it doesn`t matter the reason
for it, as expressed even in Congress.

KHIMM: But this is the thing, if it does launch a lot of litigation
and challenges, that could be a really, really messy situation. We`re
dealing with a question of whether the country going to default or not.

HAYES: Right. But I -- but let me -- to the congressman`s point, I
think to me, the idea behind a $1 trillion coin is: (a), that defaulting --
going to -- defaulting on the debt is messy, right?

NADLER: Yes.

HAYES: People should know what that means, right? When we say we`re
not going through the debt ceiling, right, there`s a huge list of creditors
out there. If you printed out everyone the U.S. owes money to, right, it
would fill up the room, right?

NADLER: We have (INAUDIBLE) Social Security.

HAYES: Yes. And literally what we were saying is, some of you aren`t
going to get paid. Now, there`s no one is specifying who is not going to
get paid or what amount.

So, maybe you just go through and you say, you know what, red state
seniors, you guys get 100 percent. Blue state seniors, you get 50 percent.
Or Democrats in Congress, you get 50 percent of your salary. And
Republicans -- I mean, literally, all of that is now open once you say
we`re not just going to pay the people we owe money to.

VERONIQUE DE RGUY, GEORGE MASON UNIVERSITY : But, technically,
defaulting would mean not paying the interest on your debt.

HAYES: Right.

(CROSSTALK)

HAYES: No, it`s not just necessarily the interest, right? The point
is there`s a lump sum of money you`ve got to pay out.

DAVID CAY JOHNSTON, AUTHOR, "THE FINE PRINT": You`ve got to recycle
that deficit (INAUDIBLE). We`re doing -- very important, most of the
borrowing out there, a two-year debt.

HAYES: Right.

JOHNSTON: So, we`re highly vulnerable to an increase in rates. By
the way, my class at Syracuse University Law School, we`re going to examine
this very question, about the constitutionality.

(CROSSTALK)

NADLER: The point of what you just said is very important. If you
default on your debt the interest rates are going to go hugely upwards and
you`re going to owe a lot more money.

JOHNSTON: That`s right.

NADLER: Your deficit is going to increase usually.

KHIMM: And we saw this resurgence on the popularity sort of all over
Twitter about this platinum coin idea and bloggers and other people have
picked it up, is that I think there`s this feeling this shouldn`t -- this
debate should not be happening.

HAYES: Yes, right, right.

KHIMM: Because there`s a strong feeling on the left that this should
not be a question.

HAYES: And this. Here`s my feeling on this -- that one of the
disturbing trends of congressional behavior in the last five years -- well,
in the 112th, particularly, is explaining the gap between norms and rules,
which is to say, the Republicans are very good at this kind of arbitrage in
which things are technically doable under the rules but just haven`t been
done before.

And to me, the trillion-dollar coin is an equal and opposite response,
which is to say, it`s in the rules. Go read the statute. We`ll go and put
it on the Web site. You can -- literally in the Treasury can mint a coin.

Now, everybody says, that`s ridiculous. It`s not been done before.
It`s not in the norm.

But the point is that the Republicans have -- their tremendous power
exploited the gap between these two and other thing I would say is that
when it comes to monetary policy, extraordinary times have produced some
monetary improvisation in the past, the greenbacks of Abraham Lincoln,
delinking gold which FDR did, which conservatives economists say one of the
things that brought us out of the Great Depression, right?

So there are moments in which you have to do sort of extraordinary
things.

NADLER: No, conservative economists say brought us into the Great
Depression.

(CROSSTALK)

DE RUGY: If I can -- I mean, I totally agree with you, Suzy. But,
you know, this practice could be a total disaster. But more importantly,
this is evidence of how dysfunctional this has become. The fact --

HAYES: You got no argument here.

DE RUGY: We don`t have a Congress who is actually interested in
addressing the real problem. How are we going to --

NADLER: Excuse me, we have a Republican Party that is willing to use
blackmail and destroy the economy in order to get their way.

DE RUGY: I`m not interested in certainly defending the Republicans.

NADLER: But that`s the reality.

DE RUGY: But the things like -- we`re not -- we`re paying -- we`re
spending way more than we collect in taxes. And this is going to continue
going forward.
(CROSSTALK)

NADLER: No, excuse me. That is not true.

DE RUGY: This is a gimmick to continue not addressing this question.

NADLER: No.

DE RUGY: I mean, like increasing the debt ceiling without having an
actual conversation. I agree that this is not -- crises are not the best
way to actually get to solid reforms. That being said --

JOHNSTON: But that`s how (INAUDIBLE).

DE RUGY: Yes, the problem is the idea that we can just give a blank
check to the government -- I mean, right now the debt is like over six
times what the government --

NADLER: I got to reply to four errors, maybe five. Number one, our
debt has been reduced as a percentage of GDP from 10.1 percent to 7.1
percent in the last three years, the largest reduction as percentage of
GDP. I think --

JOHNSTON: On its way to 3.

NADLER: On its way to 3.

Number two, the reason the deficit is so large is very simple. We
have a depression on our hands, a recession. Call it what you will.

And that means tax revenues plummet and things like unemployment
insurance and food stamps go up. Get the recession out of the way. Get
unemployment down to 5 percent. Our deficit goes way down by about 40
percent.

It`s not that we`re overspending. Our spending as a percentage of GDP
is not up. It`s down, in fact.

HAYES: In short-term, yes.

NADLER: Yes.

HAYES: Right.

NADLER: In the long-term, you have to deal with medical costs.

(CROSSTALK)

HAYES: Right. But when we`re talking about short term.

NADLER: Just a few years. And the fact is you can have a debate.
You can disagree with what I`m saying. We can have a debate over whether
the deficit is too large, whether you ought to spend or more less, tax more
or less or whatever, but not at the point of a gun by training to destroy
the economy.

HAYES: I want to thank Congressman Jerry Nadler, Democrat of New
York, for joining us this morning.

You guys are going to be back at the end of the show.

But up next, Academy Award-winning filmmaker Oliver Stone will be here
with me.

(COMMERCIAL BREAK)

HAYES: Filmmaker Oliver Stone has received three Academy Awards for
his work on the film`s "Midnight Express", "Platoon" and "Born on the
Fourth of July." Along with a Bronze Star and a Purple Heart for his
service in Vietnam.

His latest project is a 10-part documentary and a companion book on
the history of the U.S. foreign policy from all the way back in the 19th
century to the present day.

"The Untold History of the United States" airing Mondays at 8:00
Eastern on Showtime. We`ll get to that in just a moment.

First , I want to talk about movies, truth, and the responsibilities
of the artists for history, because it`s a topic much on my mind this year
with "Zero Dark Thirty", "Django" and "Lincoln" dominating the Academy
Award conversation.

Stone`s biographer, James Riordan, once wrote of Stone`s approach of
storytelling that, quote, "Stone sees his mission as communicating the
spiritual truth of the story. He may even slightly distort the factual
truth sometimes for the good of this goal. Because of this attitude, he
has never understood why people get offended when he tells what he believes
is the truth. To him, there is no such thing as an offensive truth."

Joining me at the table is three-time Oscar winner Oliver Stone.

Great to have you here. Thank you for getting UP early on this
Saturday morning.

OLIVER STONE, ACADEMY AWARD-WINNING DIRECTOR: Thank you. It`s a
challenge.

(LAUGHTER)

HAYES: I`ve been really interested in this debate that we seem to be
having this year because of the crop of Academy Award films, three of which
are so heavily focused in either specific historical periods, specific
historical actors, or specific historical record.

STONE: Right.

HAYES: Particularly "Zero Dark Thirty."

STONE: I heard you the other day.

HAYES: Yes. When you approach a film, you`ve done a number of these,
"W" and "Nixon", "JFK" famously, which drew lots of criticism -- what do
you think the responsibility of the filmmaker is to the fidelity of some
vision of what actually happened?

STONE: Well, I think you have to approach it like you would have a
college final. You do as much research as you can.

I mean, I honestly believed, after I went through tons of research
that Mr. Kennedy was killed. So I have no problem making a movie. But I
always said at the time, I said, this is a counter myth to the myth of the
Warren Commission. I was very clear about that, I got in a lot of hot
water, that people said I was trying to distort the truth. But the truth
hadn`t been established by the Warren Commission because it`s a completely,
to me, a false document and it reads badly and it doesn`t make sense
logically.

So, I followed the line and I talked to a lot of people. I didn`t
have a problem with that. So, I got to present it as a counter-truth.

HAYES: But this is the thing that filmmakers do in the situation that
drives me a little crazy as a journalist, right?

STONE: Yes.

HAYES: Which they seem to want it both ways, right? Which is at one
level, you say, well, it`s a counter-myth. But on the other level,
millions of people are going to see your movie and come away --

STONE: Right.

HAYES: You know, they`re not going to read the Warren --

STONE: I hope so because I do believe it. I do hope so.

But I don`t have -- you can`t -- you know, we are going behind closed
doors here. When I made my movie "Nixon", and I had dialogue that we wrote
based on what we thought might have happened behind closed doors between
with Mrs. Nixon and Mr. Nixon, as well as his cabinet members. So, we saw
several behind closed door meetings.

We based that on our distinct based on research. That`s the best we
can do.

And "Lincoln" is that same thing and they go behind doors, and they
create a man played by an actor.

And you saw "W", the movie I made about Mr. Bush. Again, you know, we
don`t know what the relationship is, but we sense our way through it.
That`s the best we can do. It`s an historical drama. It was never
presented to as a documentary.

When I did "Untold History of the United States" --

HAYES: Right.

STONE: -- I`m not -- there, I`m saying these are the facts as we
researched and they have been fact-checked.

HAYES: Why are you drawn as a filmmaker -- why have you been drawn to
these actually historical figures in history?

STONE: I think it`s dramatic. You know, the experience, stuff, the
great drama. It`s the basis of power.

And in these men who are -- and women who, you know, run things, who
do things, you know, the Greeks loved it. And they`re attracted to that.
To know what Nixon -- I always felt Nixon was a very ugly man. My father
respected him deeply and he was a big figure at his time.

I want to get underneath that authority figure, and find the truth.
And I found my truth, I don`t know if you remember that --

(CROSSTALK)

HAYES: I liked Nixon, I liked Nixon quite a bit.

STONE: And when I heard that he -- it`s true that he ended up on his
knees praying with Kissinger which is a great parable which is probably
what did happen, based on what people have said, you know, I think that was
a great moment. So, we have to -- you know, the whole movie is geared to
arrive at that moment.

HAYES: "The Untold History", which we`re going to talk about more
with your co-author, a lot of it is about mythologies, mythologies that get
wrapped around what America is.

STONE: Yes.

HAYES: And this idea of a counter myth which I think in some ways is
sort of the project of your (INAUDIBLE), right?

STONE: Yes. Maybe you`re right. Maybe it is. To me, the fact that
we had to drop the atomic bomb on Japan because we were trying to save
American lives is a myth and it`s a myth that`s been brought into by the
American people.

HAYES: But one of the things that come across in the series is the
role that Hollywood plays, the central role that Hollywood plays some
mythmaking.

STONE: Right.

HAYES: And the mythmaking we have about ourselves.

And I kind of want you to talk about the role that Hollywood plays in
the kind of myth that we have about ourselves, American -- right after they
take this quick break. I`ll give you a second to think about it.

(COMMERCIAL BREAK)

HAYES: Here with filmmaker Oliver Stone.

And I -- talking about mythmaking and counter mythmaking which is
somewhat sort of a project. And I think, you know, when you look at ultra
criticism of the right has of Hollywood, I think part it comes from a
really genuine and legitimate place which is the feeling of alienation from
being at the center of power where you have it within your capability to
create these myths, right?

And there`s something incredible powerful about having to be Oliver
Stone and make films that people see.

STONE: Yes.

HAYES: And I think that`s part -- do you think that`s part of why the
right is still sort of beating up on Hollywood all the time? Because it`s
a sense in which it`s alienating to not have that power yourself?

STONE: I don`t know what they`re doing. They have been exerting
their power over the American imagination since the beginning of the
century. I mean, Hollywood was originally fairly left, although there were
many people on the conservative side like the birth of a nation.

You know, by the 1930s and the `40s there was a left-winging group
that were making wonderful films, all the Frank Capra films. A lot of the
writers were communists. The writer of "Mr. Smith Goes to Washington",
which we quoted in our series, we compare him to Henry Wallace, a Jimmy
Stewart character, beautiful.

And all of these people were outed after the late `40s. They were
embarrassed by their credits that they received in the `30s. And there
were committees set up in Washington to drive all the so-called communist
element out of Hollywood.

And the leaders of the studios were awful in their policies. Walt
Disney, Mayer, and they`re regarded as legends, they were horribly people -
- what they did to the workers of Hollywood, actors and labor.

And through the 1950s, we went through anti-Communist film period,
it`s like 50 films were made ridiculing communist. And the first film
about the atomic bomb was called "The End of the Beginning" -- "The
Beginning of the End" I think it was called. It was started an anti-bomb
movie and by the time it got through Truman administration and all the
regulatory agencies in Hollywood, it was turned into the bomb is a
necessary thing type of movie.

This went on, John Wayne, he fought communists. He fought --

HAYES: Do you think that`s true -- how would you characterize if
someone came here from another country and had no experience with Hollywood
and they said what are the politics like of Hollywood?

STONE: I think it would be very relaxed by the time you hit "Rambo"
and you hit Stallone and one sense where he goes to foreign countries and
kills thousands of foreigners to trying to free somebody, an MIA, or you go
to Somalia "Black Hawk Down". And you remember the movie they butchered
like hundreds of black people dwells on how they`re slowly dying
heroically, the white men. But the black men are getting slaughtered
around them.

Same thing is true, I mean, the vigilante aspect of the whole movie
business. We saw it in "Death Wish". We saw it in Dirty Harry movies of
Clint Eastwood, Charles Bronson. And now, you see it in this movie you
mentioned, Zero --

HAYES: "Zero Dark Thirty."

STONE: I was going to say zero bin Laden.

HAYES: "Zero Dark Thirty."

STONE: "Zero Dark Thirty" is to me biased (ph) on just on the torture
level, but it`s biased among the fact that they don`t even think about the
idea of taking the man back alive and wounded back to trial and showing him
and dealing with the consequences of what he did. That kind of open
discussion would have been very helpful. We would have been like
Nuremberg, which are very important it`s one of the best movies actually,
"The Judgment at Nuremberg".

They took the Nazis. They unmasked them. They diminished them and we
understood it better. But we never dealt with that.

We just killed him, threw his body in the sea and walked away. We
never talk about it. There`s no discussion about it.

HAYES: So, what I`m hearing from you is there`s this strain of
supremacy of violence and vigilantism --

STONE: Yes.

HAYES: -- that runs all the way through?

STONE: That`s all the way through. And that`s the money-making. The
movies I do are to counter. They`re in the minority, by far.

The "Platoon" movie that was able to come out that whole wave of MIA
movies. And they`re able which was recognized at that time. But it was a
brief period, about10 years. I did "Born on the Fourth of July", the same
way.

But by the mid-90s, the 1990s, the pendulum was going the other way.
And when we discovered the World War II generation, we made "D-Day" "and
"The Saving of Private Ryan." We made "D-Day" the climax of World War II.
That was a very interesting moment, which was the triumphalism of George
Bush, the first. And the Bill Clinton era.

HAYES: It actually precedes that by a year or two?

STONE: Yes. If you look at Bush, the second, I mean, he was
obviously very influenced by the film because there was that rah rah
spirit. "Black Hawk Down" came out in 2000. We show that in our series.
We cut through it.

And also, in 2000, don`t underestimate films on precedence.
"Gladiator" was the best picture. And "Black Hawk Down" was also dominated
for director. So, these two films are emblematic of the period when power
and might were once again in ascendancy. In the same way that Patton
influenced Nixon to go into Cambodia. You saw several times of George
Scott. I don`t know if you remember, but it`s a very --

HAYES: In front of the big men.

STONE: Pro-American. Americans don`t to lose, you know? Americans
hate to lose.

HAYES: You have this new series called "The Untold History of the
United States." You`ve done it with a history professor who is going to
join us in just a second.

And I want to talk about what story you`re trying to tell, what story
isn`t told about the United States and what story you`re trying to tell,
right after this break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

NARRATOR: Ten, nine, eight, seven, six, five, four, three, two, one -

(EXPLOSION)

NARRATOR: At 5:29:45 the bomb detonates.

The light is brighter than the sun. Observing the explosion,
Oppenheimer recalls a line from the Hindu scripture, the Bhagvada Gita.

UNIDENTIFIED MALE: Now, I am become death. The destroyer of worlds.

NARRATOR: This terrifying weapon launched the United States on a
journey, turning the refuge of the Founding Fathers into a militarized
state.

(END VIDEO CLIP)

STONE: That`s the whole series.

HAYES: That`s a segment from the "Untold History the United States",
a 10-part documentary on the history of U.S. policy now airing Mondays at
8:00 Eastern on Showtime.

Joining us on the table now, Peter Kuznick -- thank you for being
here.

You collaborated with Oliver on this project. What -- how did this
come about, this series? Why did it come about?

STONE: Briefly, I just introduce Peter. He was teaching at the
American University in my films in 1997 -- 1996. And we talked -- because
I grew up in New York City, and the bomb was dropped the year before I was
born. I never really questioned the atomic bomb, ever, all my life. I
assumed because it was never -- there was a movie or two, but it wasn`t
really something that I wondered.

I asked him, what was the bomb about? He was an expert on the 1930
scientists. And he told me the Henry Wallace story from 1944 and he
connected Henry Wallace to the bomb. And there was a great story there
which he can tell.

And as a result, it opened my eyes to why the bomb was dropped.

HAYES: What was the Henry Wallace story?

PETER KUZNICK, "TE UNTOLD STORY OF THE UNITED STATES": The Henry
Wallace story? Well, Henry Wallace had been pretty much lost to history.
You ask students, you ask most people, they don`t even know who Henry
Wallace was.

Henry Wallace was one of the most remarkable figures in 20th century
America. He was secretary of agriculture for the first two New Deal
administrations in 1930, when Roosevelt was running for president in 1940
for a third term, he knew we`re in the verge on a war against Russia (ph)
and he wanted a real progressive on a ticket. He demanded Henry Wallace.
The convention refused to give him Wallace.

And Roosevelt wrote a letter resigning saying, we already have one man
dominating conservative party, we don`t need two. I`m not going to be a
candidate in this party. Fortunately, Eleanor Roosevelt went to the floor
to the convention in Chicago and made them know he was serious. And so
they put Wallace on the picture.

And then, 1944, the war was ending, getting close to the end of the
war in July `44, and Wallace was up renomination as vice president again.
The party bosses want him off the ticket. They knew Roosevelt wasn`t going
to survive another term and they knew how radical Wallace was.

In 1941, Henry Lewis writes this, "The 20th century is going to be the
American history." Wallace countered that. Wallace said, no, 20th century
must be the century of the common man. He called for a worldwide people`s
revolution, ending imperialism, colonialism.

HAYES: Even in the speech, I mean, Wallace is a fascinating figure.
He compares the American Revolution and the Russian Revolution, he sort of
steps through the revolutions.

But this gets to, I think, one of the criticisms that there`s been of
the series, and broadly of this kind of counter-narrative, right, which is
about -- in some ways is a kind of a revisionist history of the Cold War.
I think that`s a fair way of describing it. And it`s a revisionist history
that precedes along lines that aren`t novel if you have embedded yourself
in the American left, right? I mean, this kind of revisionist history has
been there before.

And the issue here is the recognition of the nature of the Soviet
state, right? That Wallace was on the wrong side of history in this
respect. That he was duped. That he went there, he saw the Siberian war
camps, they said, oh, it`s all volunteer labor. He wrote a book later in
his life, right, saying, I was wrong. I got it wrong. He actually ends up
endorsing Nixon and Eisenhower, right?

Why -- why should Wallace be this kind of visionary figure if he was
wrong about the nature of the Soviet state, and that was such a defining
issue not just for the world at the time but for the left specifically?

KUZNICK: He was not the only one who was wrong when he went to
Magadan.

HAYES: Right.

KUZNICK: Also, the China experts who are on the trip. The Russian
experts got it wrong. The military people on the trip got it wrong also
because they set it up to show him the village which is not the reality.

He was not wrong on big issues throughout his life. He was consistent
on the big issues. Issues were, as you were saying --

HAYES: Racial integration.

(CROSSTALK)

KUZNICK: Racial integration and ending colonialism. We could have
ended colonialism much earlier and much more peacefully. He was -- the big
issue, he was the leading spokesperson against the nuclear arms race. When
he was -- after he doesn`t get the nomination, when they replace with
Truman of all time, Wallace stays inside the cabinet as secretary of
commerce.

And he fights from inside the cabinet for the next year to try to stop
the Cold War from developing. He`s right about that. If you read his
writings, and I`ve read them all during that time, I think he`s right on
every important positions he takes. He tries to --

HAYES: But then is he right when he later says I was wrong?

KUZNICK: No.

(LAUGHTER)

KUZNICK: That`s the one time he`s not right. I mean, he was wrong
about a few things. He got the labor camp wrong. But that`s not a big
deal.

But -- and it`s not that he doesn`t understand the nature of the
Soviet Union, he thought if the United States and the Soviets remained
friends, the important thing was the United States and Soviets collaborated
very well during World War II. One of the myths that people don`t know,
most Americans think that the United States won World War II militarily.

HAYES: This is something that comes out in world history and I think
this part is really important, which is just the emphasis on what the
Russian experience of World War II is, which has been I think largely
written out of American history because we tend to focus on D-Day. But you
talked about this (INAUDIBLE).

I want you to talk about why the emphasis on that experience, right
after we take another break.

STONE: Wow, it goes too fast.

(COMMERCIAL BREAK)

HAYES: Talking about "The Untold History of the United States".

And we were discussing this idea of -- you know, Hollywood is the
center of mythmaking about American history and the project of counter-
myth. And I thought one of the places where I think this is the most
important, is your focus on the series, on just the Russian experience of
World War II? Because it is -- we don`t think about it a lot when we think
about World War II, that`s partly because we are Americans.

Why did you want to focus on the Russian experience?

STONE: The series for 10 hours is really about America.

HAYES: Right.

STONE: And it`s about -- and what Russia affects -- the Soviet Union
has a huge role in this, and it changes us, it distorts this (INAUDIBLE)
national security state. But it starts in the first three chapters, we
show a clip of the bomb being tested in Alamogordo. And you show
Openheimer there looking at his watch.

It`s reason, that`s a founding moment. That is a myth, a founding
myth that we had to drop the atomic bomb on Japan because -- to save
American lives. We go to some length to deconstruct that myth. And it`s
very important to understand that we did not have to.

Japan was gone. It was finished. They were worried about the Russian
invasion that was coming towards them from the mainland.

It was a serious invasion. They knocked out a major Japanese army.
It was over.

We dropped the bomb to tell the Russians, look, this is the new rules.
This is a new war. You screw with us, this is what you`re going to get.

You screw with us in Europe. You screw with us in Asia. This is your
reward.

We were very barbaric in doing that. It was a rear signal to Russia,
after they had been our allies in World War II. They did not deserve it.
But they got the signal. Stalin was no fool.

So, this is important. That`s one myth.

The other myth, what he was talking about was colonialism, and it was
the British empire rule in World War II and what Churchill was writing for,
he wasn`t interested in knocking out -- putting up the second front to help
the Russians. He was interested in getting the colonies back for England,
all the way to India, Singapore, et cetera, Iran, the oil supplies.

That`s what we have to go. These three myths are very important to
understand at the beginning of the story.

HAYES: The nuclear era dawns and it produces the National Security
Act of 1947. And the construction of what is, I think, what the series
describes as, and I think describes accurately is essentially a permanent
war state in the U.S.

STONE: Yes, exactly.

HAYES: How do you begin to undo a permanent war state?

STONE: Well, we can -- we got -- there`s 10 chapters here.

(CROSSTALK)

KUZNICK: The way -- the way you begin to undo it is to educate people
about what the history really is. People don`t have a clear understanding
of their history, and then they`re going to think the way this has evolved
is the way it had to evolve. We`re trying to show with Henry Wallace.
With our treatment of John Kennedy. Our discussion of what happens when
Stalin dies on March 5th, 1953.

We`re showing that there are these pivotal moments when history could
have been fundamentally different.

HAYES: Yes, that is one of the things here and one of the things I
think is interesting and actually rankled me a little bit is that, you
know, kind of -- the left approach to history has been both these counters
narratives but also rejecting this great man theory, right? I mean, the
Howard Zinn -- the iconic Howard Zinn Project is about history from the
bottom up as supposed to great men calling the shots and their leadership
and determining outcomes.

But this series seems to cue very come closely to a great man theory.
I mean, there are essentially saints and scoundrels, right? And when you
have scoundrels in power, you have bad stuff. And the saints keep getting
squelched.

My question is, do you think fundamentally that that what history
comes down to, these sort of pivotal moments of these pivotal characters?

STONE: There are pivotal moments. The bomb was not made by bottom
up. It was made , from the top down.

KUZNICK: I mean, a lot of these things are done in secret, behind
closed doors. The public couldn`t weigh in on the bomb because nobody knew
that we were building the bomb. The Russians knew, but that`s the
different issue.

If you`re going to deal with those kind of pivotal moments, you have
to deal with the power players at the top. Now, other places we bring in,
for example, when we talk about Nixon, we show how much Nixon was
influenced by the anti-war movement. He was obsessed by the anti-war
movement. He limited a lot of things he did, fortunately.

So, we`re not trying to downplay social forces that are crucial.
Howard Zinn was a huge fan of project, which is we`re very sorry he`s not
here to enjoy this with us.

(CROSSTALK)

KUZNICK: -- got elected between.

HAYES: But I sense in you a filmmaker, an approach to story-making
that doesn`t -- is not grounded in the sort of historical concerned with
this kind of large structural forces, but is more focused on these
individuals. I mean, that`s where you`re coming from --

STONE: That`s true. But in the way, there`s a drama, like "Born on
the Fourth of July", it`s a story about a man that gets a bullet in -- it`s
a very violent movie. In one sense, he gets a bullet -- he is wounded and
paralyzed the rest of his life. It`s about him.

But when he joins them at the end of the movie, he goes into a
movement, which was anti-war in Vietnam, which Ron Kovic did join, and you
see the effect that these people have, as he is said, on policies and
getting us out of the war. Those people worked.

In the `60s, that worked, the protests. In the same way I was going
to say that Reagan was influenced by the youth protest of the nuclear
freeze in the early `80s. So it does sometimes have an effect.

`89 was a great moment, 1989. You were around I think.

HAYES: I was.

STONE: 1989 was an olive branch. I mean, George Bush the father had
a moment when Gorbachev was saying it`s over.

HAYES: Right.

STONE: Every country in the world fell, every communist country.
That was the wonderful moment. And what did Bush do? He invaded the
Panama the next month and then he invaded Iraq the first time, a year
later.

HAYES; Peter Kuznick from American University, collaborator on "The
Untold History of the United States", 10-part series, and also companion
book, around 700 pages that you can check out at bookstores -- thanks for
coming in.

Oliver, stick around for now we know, if you don`t mind.

STONE: OK.

HAYES: What do we know now we didn`t know last week? My answer to
that, next.

STONE: This week, tell me, what happened?

(COMMERCIAL BREAK)

HAYES: All right. So what do we know how we didn`t know last week?
Well, we now know that 2012 was the safest year for air travel since the
dawn of the jet page more than 50 years ago. In all of 2012, there are
only 22 fatal crashes worldwide in all flights, and only 10 of those
flights were in passenger aircraft according to data assembled by the
Aviation Safety Network.

These figures were compiled before last week`s crash of a jet near
Moscow which killed four people. But before that crash, the data works out
to about one fatal accident per 2.5 million flights. And keep in mind that
2012 was also twice as safe as the previous safest year on record, which
was 2011.

And not only was it twice as safe as the previous year, but the total
number of flights increased by 5.5 percent, according to the International
Civil Aviation organization.

We now know that in the U.S., which hasn`t had a single fatal accident
since a commuter plane crash in buffalo in 2009, the picture is more
impressive. After two crashes in 1996 that killed 375 people, a White
House commission cracked down on the airline industry, asking to reduce the
rate of fatal accidents over a 10-year period.

In 2007, the accident rate dropped to 65 percent. That`s one fatal
accident of about 4.5 million departures from nearly 2 million in 1997,
according to "The New York Times".

We know that back in the 1970s and 1980s, when the plane crashes were
routine, this kind of safety record would have been unthinkable. I mean,
think for a second, we hurl hundreds of thousands of pounds of metal
through the air over 500 miles an hour millions of times a day, and it
almost never goes wrong.

We know that in the wake of the spectacle of frustrating dysfunction
that was the fiscal curve deal, we can easily get cynical about the
possibility of progress, we know it really is possible for us as a society,
through regulation and technology and competition and boring, unheralded
work of civil servants in the Federal Aviation Authority and National
Transportation Safety Board to solve extremely difficult, deadly problems.

We still don`t know what the Obama administration`s legal
justification for targeted killing combatants, including American citizens
abroad is, because they claimed those internal legal justifications are
secret. We now know that U.S. District Judge Colleen McMahon agrees with
the White House.

"The New York Times" and two of its reporters, Charlie Savage and
Scott Shane, sued the government for internal documents relating to the
U.S. drone strikes that killed American citizen Anwar al-Awlaki and his 16-
year-old son Abdel Rahman in separate strikes ion 2011.

"The Times" explicitly requested to see a memoranda about the legality
of such strikes prepared by the Department of Justice`s Office of Legal
Counsel. Despite noting that disclosure of the administration`s secret
justification for killing American citizens might help us better understand
the, quote, "vast and ever seemingly growing exercise which we have been
engaged for well over a decade," Judge McMahon nevertheless ruled the
government did not violate the Freedom of Information Act in refusing to
turn over the documents.

We know "The New York Times" will appeal and we know we cannot even
have the most basic democratic debate about the propriety or
constitutionality of targeted killing of American citizens unless we know
just what legal arguments the White House is making in its favor.

Back to the table now, Suzy Khimm of "The Washington Post", Pulitzer
Prize-winning journalist David Cay Johnston, Veronique De Rugy of George
Mason University. Oliver Stone is still with us.

I want to find out what you know now, Suzy Khimm.

KHIMM: All right. So what I know now after this week is that
President Obama and the last Congress did their darndest to preserve George
Bush`s legacy. And why do I say that? That`s because the fiscal cliff
deal only raised income taxes on 0.7 percent of all taxpayers. Just
because there aren`t that many Americans who earn more than $450,000, who
have estates worth more than $5 million? Why did they do this?

What we know is that they did it in the name of protecting the middle-
class, but as you saw over the course of the debate, the definition of who
got defined as middle-class got defined up higher and higher. So, as a
result, you know, there are some parts of the fiscal cliff deal that did
help the working poor, that help the unemployed, but those changes were
temporary.

What happened is that fiscal cliff deal preserved the vast majority of
the Bush tax cuts, those are not permanent and that`s going to be a
cornerstone of Obama`s own legacy is protecting the tax changes that his
predecessor, George Bush, passed.

HAYES: David Cay Johnston?

JOHNSTON: Well, what I know is reinforced by what your point about
airlines. The government cracked down, and we got safer airlines. I
talked to businessmen, two of them this week when I was in New Orleans at
the American Association of Law Schools who both said to me that they hate
this pressure to lower the wages on their workers, they want universal
health care, they can`t do it because the system won`t let them.

The rules matter. And one of the panels we talked about there is
about how when government a government allows some businesses to cheat, it
is not just the consumers they are cheating, it`s every honest business.

Same thing applies to safety rules. Rules matter. Rules defined our
society. If you don`t have rules that say that everybody has to apply and
enforce those rules, you end up with terrible problems. We would have
plane crashes left and right if it weren`t for consistent rules on safety.

HAYES: Veronique?

DE RUGY: What we know is that the president is pursuing rendition
policy via kidnapping and interrogating of suspected terrorist without due
process, a policy that he criticized heavily, rightfully, when George Bush
was doing it. So, basically, we know that not only is President Obama
pursuing the failed economic policy of the Bush administration, but also
the foreign policy blunder.

HAYES: Oliver Stone?

STONE: Well, the judge that you mentioned and two literary references
in her dialogue, and she mentioned Alice in Wonderland and she mentioned
Catch-22, just thought of that when you said that. Good quotes for the
literary.

Chapter 10 is coming up January 14th -- that`s our last of our 10-part
series.

And we did a lot of the new work into the future on the -- Obama is a
very efficient war president. He is developing -- he`s talked about cyber
space and space and cyber space development, full spectrum dominance. But,
really, we put a tremendous effort in space, and we refuse to sign the
United Nations treaty. We`re outlier, Israel and us.

HAYES: About not weaponizing space.

STONE: We have militarized space, we weaponized it with drones. But
all kind -- Alfred McCoy of the University of Wisconsin talks about a
three-tiered system from 250 miles up to about 50 miles up.

HAYES: Right.

STONE: Very dangerous. Electronic frontier and can blind a foreign
army. We are in charge of it, and the Chinese are not stupid and neither
are the Russian, but it is dangerous --

HAYES: One thing that comes across in untold history is that two
things that dominated the American public imagination, the nuclear bomb and
space, which has sort of disappeared but are still, right? We are still in
space, and nuclear weapons are still a problem.

My thanks to Suzy Khimm of "The Washington Post", Pulitzer Prize-
winning journalist David Cay Johnston, Veronique De Rugy of George Mason
University and Oliver Stone, Academy Award-winning director whose Showtime
series, "The Untold History of the United States" airs Monday night at 8:00
Eastern -- thanks for getting UP.

Thank you for joining us today for UP.

Join us tomorrow Sunday at 8:00. I`ll have freshman Congressman
Hakeem Jefferies, Democrat from New York, and NAACP president and CEO, Ben
Jealous.

Coming up is "MELISSA HARRIS-PERRY". On Today`s "MHP", the
lieutenant, how Eric Cantor and Joe Biden emerged this week as the key
Washington deal makers or breakers. Plus, the president says immigration
reform is at the top of his to-do list right now. What will meaningful
reform look like? That`s "MELISSA HARRIS-PERRY" coming up next.

We`ll see right here tomorrow at 8:00. Thanks for getting UP. Happy
New Year.

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

<Copy: Content and programming copyright 2013 MSNBC. ALL RIGHTS RESERVED.
Copyright 2013 Roll Call, Inc. All materials herein are protected by
United States copyright law and may not be reproduced, distributed,
transmitted, displayed, published or broadcast without the prior written
permission of Roll Call. You may not alter or remove any trademark,
copyright or other notice from copies of the content.>





WATCH 'UP W/CHRIS HAYES' SATURDAY AND SUNDAY FROM 8:00A.M. ET TO 10:00 A.M. ET ON MSNBC.


Sponsored links

Resource guide