THE LAST WORD WITH LAWRENCE O`DONNELL
February 15, 2013
Guests: David Leonhardt, Alice Rivlin, Jesse Eisinger, Bill Nye
EZRA KLEIN, GUEST HOST: Some of my colleagues in the media, they
watched the State of the Union and they said, nothing new here. What were
TAMRON HALL, MSNBC ANCHOR: The follow-up.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: On Tuesday, I laid out
HALL: President Obama picking up right where he left off.
OBAMA: I delivered my State of the Union address.
UNIDENTIFIED MALE: With the standard laundry list.
CHUCK TODD, NBC NEWS: The laundry list of the familiar-sounding
OBAMA: Immigration reform, climate change. High-quality pre-school.
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: More stimulus
SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: Lip service.
BOEHNER: More tax hikes.
MCCONNELL: And liberalism.
BOEHNER: This isn`t the agenda that many Americans are looking for.
TODD: Many of the proposals maybe headed for defeat.
OBAMA: Tonight, I proposed working with states.
ALEX WAGNER, MSNBC ANCHOR: An encouraging sign for education reform.
OBAMA: Make high quality pre-school available.
BOEHNER: It`s easy to go out there and be Santa Claus and talking
about all things you want to give away.
UNIDENTIFIED MALE: They`ll make the argument we just don`t have the
WAGNER: Exhibit A, John Boehner.
BOEHNER: At some point, somebody has to pay the bill.
OBAMA: This works, we know it works.
SEN. ELIZABETH WARREN (D), MASSACHUSETTS: The question I really want
to ask --
UNIDENTIFIED FEMALE: They want to get to Elizabeth Warren.
WARREN: -- is about how tough you are.
UNIDENTIFIED FEMALE: Her debut on the Senate Banking Committee.
UNIDENTIFIED FEMALE: Pretty comfortable during her debut.
WARREN: Can you identify when you last took the Wall Street banks to
UNIDENTIFIED FEMALE: They couldn`t answer.
UNIDENTIFIED FEMALE: I will have to get back to you.
UNIDENTIFIED MALE: We have not had to do it as a practical matter.
UNIDENTIFIED FEMALE: The penalties we can get are limited.
STEPHEN COLBERT, COMEDIAN: Folks, that is bull`s (EXPLETIVE DELETED).
WARREN: They don`t have much incentive to follow the law.
COLBERT: Blazing-wearing Ezra Klein holds out there are calling for
bankers to go to jail. Folks, that is bull`s (EXPLETIVE DELETED).
ANDREA MITCHELL, MSNBC ANCHOR: This is what she knows best. This was
UNIDENTIFIED MALE: That is why she was sent to Washington.
COLBERT: Also gets AAA rating from Standard & Poor`s.
KLEIN: The weirdest thing happened in the days after the State of the
Union. My colleagues in the press, they watched the exact same speech I
watched, I think. They heard the same policies I heard and a lot of them
walked away saying kind of, nothing new here.
Ron Fournier`s headline in "The National Journal" was: "Nothing big or
bold about Obama`s State of the Union address." Nothing big or bold.
I had exactly the opposite take. I thought President Obama`s State of
the Union, for better or for worse, was shockingly bold. And the reason I
say shockingly is that usually, you get the second-term agenda during the
re-election campaign. In fact, usually you get more in the second term
agenda during the election campaign.
Politicians running for re-election -- they`re not known for being
modest. The plans tend to be something like that every American gets a
pony, no, a unicorn, no, two unicorns, every pot, a unicorn.
If you remember, that`s actually pretty much how Mitt Romney`s tax
reform plan worked. But while Mitt Romney is promising every American a
tax-icorn, President Obama`s reelection campaign election was kind of
modest on the policy front. If you remember his big convention speech, the
promises there were weirdly small and the policies to get to them, a bit
(BEGIN VIDEO CLIP)
OBAMA: We can cut our oil imports in half by 2020, and support more
than 600,000 new jobs in natural gas alone. So help me. Help me recruit
100,000 math and science teachers within 10 years. Help us work the
colleges and universities to cut in half the growth of tuition costs over
the next 10 years.
You can choose a future where we reduce our deficit without sticking
it to the middle class. I want to reform the tax code so that simple,
fair, and ask the wealthiest households to pay higher taxes on incomes over
(END VIDEO CLIP)
KLEIN: A few more teachers, a bit more natural gas, lower deficit,
tax reform -- look, it`s all good stuff. But it`s not that big, there was
nothing big and specific on immigration reform, or what to do about climate
change. It was a speech of a popular tweaks, not big ambitions for the
And that was the campaign. So it would have been fair to expect a
pretty small second term.
But the State of the Union was all ambition. It was big. It was so
big, and there was so much in there, that watching it kind of flash me back
to all my insomniac nights watching infomercials, just when you think there
could be one more thing, this blender can do, it turns out it irons shirts
or in this case raises the minimum wage to $9.
Watch what I mean.
(BEGIN VIDEO CLIPS)
OBAMA: More than half way towards the goal of $4 trillion in deficit
reduction. On Medicare, I`m prepared to enact reforms proposed by the
bipartisan Simpson-Bowles commission.
Getting rid of tax loopholes and deductions for the well-off and the
well-connected. I put forward an American Jobs Act that independent
economists say would create more than a million new jobs.
UNIDENTIFIED MALE: But there is more.
OBAMA: A bipartisan market-based solution to climate change. Fix it
first program, to put people to work as soon as possible on our most urgent
I propose working with states to make high-quality pre-school
available to every single child in America.
UNIDENTIFIED MALE: But there is still more.
OBAMA: The time has come to pass comprehensive immigration reform.
We`ll engage Russia to seek further reduction in our arsenals.
UNIDENTIFIED MALE: But I know you want more, what about eight
matching steak knives?
OBAMA: A non-partisan commission to approve the voting experience in
Background checks that will make it harder for criminals to get their
hands on a gun.
Raise the federal minimum wage to $9 an hour.
(END VIDEO CLIPS)
KLEIN: They just had that guy there, saying I know you want more, so
we got you a steak knife.
That is a lot that the president proposed to do. Imagine -- imagine
for a moment that President Obama actually does manage to pass every policy
he proposed Tuesday night. Within a couple of years, every 4-year-old in
the country would have access to pre-school. The federal minimum wage
would be higher that`s been after adjusting for inflation, since about
There`d be a cap and trade program, limiting our carbon emissions, and
a vast infrastructure investment to upgrade our roads and our bridges.
We`d be spending about $500 million on a new massive stimulus package, the
tax cuts, infrastructure, and schools, and much, much more. Taxes would be
higher on the wealthy, by the way, and guns would be a lot harder to come
by. And undocumented immigrants would have a path to citizenship.
America would be a remarkably different country after this agenda. It
would feel different, look different, be different.
Now whether much of it will actually pass, that is an open question.
But just going on the policies and on the ideas, make no mistake about it.
This is going to be a big second term.
Joining me now is a very big thinker who just wrote actually a very
small book, a Kindle single, actually, called "Here`s the Deal," which you
should all read. David Leonhardt, Washington bureau chief for "The New
York Times" -- it is good to see you.
DAVID LEONHARDT, NY TIMES, WASHINGTON BUREAU CHIEF: Thank you. It`s
good to be here, Ezra.
KLEIN: So, tell me how you see the pieces fit together. What is --
when you heard the sort of breath of the policy agenda, what did you see as
the connecting theme?
LEONHARDT: First of all I think you`re right, I do think this is a
pretty bold policy agency, certainly a lot bolder than he laid out during
the campaign. I think a big part of that is that his political advisers
told him people don`t want to hear boldness from you anymore. And so, they
dialed it back, and then you see them dial it up, starting actually with
the speech on election night.
To the extent that there`s connective tissue here, and I think there
is some, although it doesn`t explain it all, I still think trying to reduce
inequality, and trying to lift living standards for the majority of people,
whether it`s middle class and the poor is something that has been at the
top of President Obama`s mind since he was a candidate. And I think a lot
of ideas in the speech connect back to that.
KLEIN: I completely agree with that. I actually think that
inequality has become sort of the Rosetta stone to the administration in
the last couple of years. What particularly struck you about that in here?
For me, it was the pre-K side of it, the pre-K and the minimum wage, which
I hadn`t been expecting both of those.
But what caught your eye?
LEONHARDT: So, I think both of those, absolutely right? I mean, pre-
K, right now, 3 and 4-year-old kids who are from relatively high income,
high education families get pretty good pre-K, right, and so part of what
happens, part of what drives inequality is the fact that we`ve got these
big gaps even as kids are in kindergarten. So, definitely pre-K.
But the minimum wage as well. I mean, my reading on the evidence on
the minimum wage -- tell me if you disagree with this -- is that basically
it`s not a free lunch, but it also doesn`t come with huge economy cost.
So, it doesn`t slam the economy with a lot of job loss. There may be a
little bit of job loss, but it doesn`t seem to be too much.
So, basically what happens is, business absorbs the cost, which is to
say they pass them on to the customers or they pass them on their
stockholders in the form of lower profits. And so, it`s basically taking
some income that`s now going to the top and the middle and redistributing
it towards the bottom. And that`s, you know, it -- who knows whether it
has a serious chance of passing? But that`s a serious inequality policy.
KLEIN: I think that word "redistributing" is actually important.
It`s kind of a dirty word in American politics. But as I understand the
White House`s theory at this point in time I think they see the economy has
having changed in certain ways, such as a lot of more the gains of it are
going to people at the top. And a lot of gains of it are going to
And one role for the government to play, is that we`re going to have
growth that is broadly shared, a lot of that stream is going to have to
come from direct government policy. And they don`t see that as a socialist
agenda. They see that as what you need to keep a strong consensus for sort
of a pro-growth capitalism.
I`m curious if you agree with that.
LEONHARDT: Yes. And I think he`s been really consistent on this. If
you go back and you look at the campaign -- I mean, one of the things that
I remember talking to Austan Goolsbee about it in 2008, when very few
people knew who Austan Goolsbee was and Obama was just a candidate, was
Austan Goolsbee would say, look, this is a really wonky thing, but one
thing that`s very important to then-Senator Obama is this idea of the
refundability of tax credits, which is tax cuts and tax cuts, which is the
idea that if you`re going to cut taxes, you got to make sure you`re doing
it in a way that helps people who aren`t even paying that much income tax,
which is obviously a big issue on the right, right? The 47 percent.
But Obama saw this issue as, look, we have had a big increase in pre-
tax inequality, market inequality. And we`ve also over the last 30 years
we had the biggest tax cuts going to the top. He wanted to reverse it and
have the bigger tax cuts go to the middle and the bottom.
KLEIN: I just want to note, David Leonhardt, I knew who Austan
Goolsbee was in 2007.
LEONHARDT: I don`t doubt that.
KLEIN: Thank you very much for joining me tonight.
LEONHARDT: Thanks for having me.
KLEIN: Good to see you.
Now, are you ready to have your mind a little bit blown? Seriously,
there is a single fact inside the budget, a single number that explains a
lot about what the president is planning right now. And it`s kind of a
mind-blowing number. Alice Rivlin will join me next.
And also, why do so many people in Russia have cameras in their cars?
And what does it have to do with the total destruction of the human race?
(BEGIN VIDEO CLIP)
ALICE RIVLIN, ECONOMIST: We can`t grow our economy and have a
prosperous America with debt growing that fast.
UNIDENTIFIED MALE: It`s time to shake things up.
(END VIDEO CLIP)
KLEIN: Oh, my God. Is that Alice Rivlin -- the Alice Rivlin, the
founding director of the Congressional Budget Office? Is that Alice Rivlin
doing the Harlem shake?
(VIDEO CLIP PLAYS)
KLEIN: It is. It is Alice Rivlin doing the Harlem shake. And she is
coming up next to talk about the thing in the budget that might blow your
mind more that Alice Rivlin doing the Harlem shake.
KLEIN: Vice President Joe Biden has one of my favorite phrases in all
of politics. He says, don`t tell me what you value, show me your budget
and I will tell you what you value. Keep that in mind, it may be one of
the most mind-blowing facts about a federal budget.
Right now, in America, according to analysis by the Urban Institute,
the federal government spends $7, $7 on an elderly person for every $1 it
spends on a child -- $7 for $1.
You know the first person who would say that is kind of an outrage?
My grandmother. Can you imagine your grandmother hoarding the cookies or
the Christmas presents, seven for them for every one of the grand kids?
But it is true in the federal budget. America spends more money on
the generation that built its past than the generation that will build its
future. The 39 million elderly people in American received 31 percent of
our federal spending with the nearly 80 million kids in America get 10
percent, 10 percent.
Here is the federal budget in a chart -- 41 percent of the budget goes
with spending on adults and entitlement programs like Social Security and
Medicare and Medicaid, 20 percent goes to defense, 23 percent goes to other
government functions, 10 percent to kids, and 6 percent to interest on the
debt. And, by the way, in five years, it is projected that we`ll be paying
more on the debt than on the kids, which will put children dead last in the
categories of things we spend our money on. Kids are our future, but not
so much in the budget.
So that 10 percent that we currently spend on the kids, what do we
spend it on? We spend the plurality, I`m sorry, of it on tax breaks for
the parents, also on health care and education for older kids. A lot of
states spend it on education. Some of that money -- there is more funding
at the state level than the federal level, I should note that here.
But this is what we spend on early education and care at the federal
level, about $12 billion, out of $3.6 trillion budget, we spend $12 billion
on educating and caring for the youngest children.
The preschool needs a better lobbyist. Or maybe they just got one.
Because this is what President Obama is trying to change with the very
ambitious, actually, universal pre-K proposals.
Right now, only three in 10 4-year-olds in the United States are
enrolled in high quality pre-K programs. France has nearly universal
enrollment. So did the U.K. and Mexico? America ranks 28th behind the
Would your grandmother be happy to hear her children are getting as
much education as kids in the Slovak Republic?
President Obama`s proposal would provide full federal funding for high
quality public preschool to all 4-year-olds, from low and moderate income
families. And it would provide incentives to states to enroll more 4-year-
olds from middle income families.
But the Obama administration is not in the pre-school business, so
they`re prepared to tell states, you do it your own way, you can design and
you can customize it your own pre-K program as long as those programs, as
long as those programs meet a few quality standards. One of which is
highly educated pre-school teachers who are paid comparably to K-through-12
Joining me now is the founding director of the Congressional Budget
Office, a former member of the president`s debt commission, and an
excellent Harlem shaker, my friend, Alice Rivlin.
Alice, how are you?
RIVLIN: I`m fine.
KLEIN: So, this is I think a fascinating sort of dimension of our
budget debates right now, because we tend to talk about the deficit in
terms of what it will do to the private economy. And at the moment, it
doesn`t seem to be doing all that much. But one thing that is happening in
the way we spend our money is we seem to be squeezing out a lot of the
investments in the future, investments in kids, investments in research and
education. And that actually seems to me like a more pressing problem we
need to fix in the budget.
RIVLIN: Oh, I agree, I think the real danger of not getting on top of
the rising debt is for young people. It isn`t just that we won`t spend as
much on education, for example, but we won`t spend as much on the things we
need to grow the economy, when they grow up, it will be more productive,
like science, like the things you mentioned, like infrastructure. Those
will be crowded out, because most or very large proposition of our spending
is committed to programs for older people.
And if those grow on the -- at the rate that they have been growing,
it will squeeze out almost everything else.
KLEIN: And one of the other dangers about that, too, aside from the
automatic programs like Medicare is that we can do reduction in a dumb way,
instead of, say, cutting tax expenditures and cutting spending deep into
health care, we cut deep into things like education. And the sequester,
which now seems more likely to go into effect than I think anybody thought
months ago, the sequester hammers things like education, and totally
exempts, say, Social Security, tax expenditures, a lot of those programs.
RIVLIN: The sequester is truly dumb policy, from lots of points of
view. It would endanger the growth of our economy right now. Likely
increase our unemployment rate. But it cuts in a really stupid way.
Program by program by equal percentages, and that means that things that we
really care about and need to run the government and to grow the economy
get cut just as much as things that we don`t care as much about.
KLEIN: Right. And one of the things about that, I think, is that
when we talk about the deficit, we tend to sort of -- and about the
economy, we tend to just talk a lot about it in terms of what do we cut or
what do we tax? But a lot of whether or not we are going to be fiscally
sustainable and have a reasonable budget in the coming years is about
things that we`ll grow.
And things like -- particularly early childhood education, also
research. I mean, a lot of the major industries today from the Internet to
biotech have a big federal budget behind them like we talked about in the
past. If we cut deep into those sort of growth areas of budget and slower
growth in the future, that`s counterproductive cutting. I mean, I think
people sometimes say you cut anything in the budget and you help the
deficit. That`s not true.
RIVLIN: No, it`s definitely not true. And right now, we have cut
those appropriated programs that the budget wonks call discretionary
spending, that include --
KLEIN: Worst term in the budget.
RIVLIN: Worst term in the budget. It`s terrible.
But we have cut that already, we don`t need to cut that anymore. What
we need to do is gradually reduce the rate of growth. Not cut, but reduce
the rate of growth of the programs, mostly for older people that are
scheduled to go up so rapidly in the future.
HAYES: And now, what do you think of the president`s early pre-K
proposal? And in particular, what do you think of the idea to let the
states on their own to give them sort of incentives to create early
childhood programs and just make them meet quality measures instead of
creating sort of a big federal program and administering it?
RIVLIN: Oh, I think that`s absolutely right. Many states have done a
good job on pre-K schooling already. North Carolina, for example. There
are several others have done really good work. And I think this ought to
be an area like most of elementary school and secondary education that the
states are in charge of.
And we ought to integrate Head Start into that. Head Start is a
federal program but it`s not integrated into the other state pre-school
KLEIN: Right. I totally agree on Head Start. One the bigger
question here is the way they want to fund it. And the one way they want
to do it is the federal government will match what states spend on it. It
will sort of a federal match, in the way that something like Medicaid is
That sometimes worries me because states have been pretty strapped
recently. I mean, do you think that will be a secure social funding, that
will be enough to get states to move forward with it?
RIVLIN: I think we have to think about this very carefully, because
as you say, states are mostly in trouble anyway. They have had -- they
have suffered in the recession, and some of the revenue sources are not
growing. So they may not be able to come up with the matching money. This
is a problem for Medicaid, as well.
KLEIN: Yes. Alice Rivlin, founding director of the Congressional
Budget Office, a fellow at Brookings -- it is great to see you as always.
RIVLIN: Great to see you.
KLEIN: Senator Elizabeth Warren`s first at bat against banking
regulators, and she hit it out of the park. That is next.
And also tonight, you know who is here tonight? It`s very exciting.
Bill Nye the science guy is here tonight. I am not even kidding.
KLEIN: Yesterday was Valentine`s Day. Now, I like Valentine`s Day.
I love Valentine`s Day. I`m romantic.
I don`t know if I should admit this. But my taste in movies leans, or
maybe I sure honest and say runs at full tilt as fast as it possibly can,
towards romantic comedies. But my taste in politics gravitates towards to
And so, thankfully, the Internet yesterday, as a Valentine`s Day
present, to me, brought those two things together. So I give you wonky
love, Valentine`s Day`s graphs and charts.
Feast your eyes on this beauty. It is a formula -- a formula when you
plug it in a graphing calculator, it graphs a heart.
Or a financial poll on the trajectory of the S&P versus the love of
the writer`s life, quote, "The S&P was in the red but I was not blue,
because I shorted the market and went long on you."
And, of course, Twitter was all atwitter with the nerd love. The San
Francisco Reserve. The San Francisco Federal Reserve tweeted, "Shall I
compare thee to a Fed decision? Thou art more irrational and more
And Erik Gahner tweeted, "You`re like most published studies. A
positive finding and impossible to replicate." That is really romantic.
And the news later, all the more heartbreaking that we might all die
from an asteroid. But I`m going to talk to the only man who might be able
to save us. Bill Nye the science guy. Seriously.
(BEGIN VIDEO CLIP)
STEPHEN COLBERT, "THE COLBERT REPORT": Now, nation, it has been five
years since the global economic meltdown. And while even I used to be mad
at Wall Street, at this point, who can even remember who wired the global
financial system to a roulette wheel, jacked on enough cocaine to bring
down a bison?
And yet, the Maddow, blazer wearing, Ezra Klein-holes out there are
still calling for bankers to go to jail. Why can`t they just let bygone
pensions be bygones?
(END VIDEO CLIP)
KLEIN: In the Spotlight tonight, a topic of great interest to me-
holes. Specifically Elizabeth Warren`s big moment. Democrats were really
excited when Elizabeth Warren was elected to the Senate. She was smart.
She was a bit of a fire brand. She was great on taxes and consumer
I was excited because we had somebody in the Senate who finally was
truly a finance wonk, who had genuine expertise on the issue. Then there
was this whole question of whether lobbyists would manage to keep Senator
Warren off of the Banking Committee. They did not manage to keep her off
the banking committee. Senate Democratic leadership gave her a spot on
that Banking committee.
That committee has oversight over Wall Street and the institutions
that bore much of the blame for the financial crisis, and -- and -- this is
important -- and their regulators.
But then something kind of unexpected happened. In Elizabeth Warren`s
first month in Washington, she kept pretty quiet, so quiet that just two
days ago, "Politico" ran this headline, "Elizabeth Warren`s Quite Plan for
The article declared that since taking office, Warren has kept the
lowest of profiles. When the Senate Banking Committee meets for the first
time on Thursday, all eyes will be on Warren, they said. But if her first
Capital Hill news conference on Wednesday is any indication, Warren will be
leaving her megaphone at home.
Good news, she brought her megaphone to work, where it belongs. Now,
sure, it was a day when most were focused on Chuck Hagel and a cruise ship,
I think, and chocolate. But it was noise nonetheless. And it was during a
hearing with the very sexy name of "Wall Street Reform, Oversight of
Financial Stability and Consumer and Investor Protections." And if you
weren`t tuned into to that on C-Span, I don`t know what to say to you.
The witnesses were seven federal financial industry regulators from
even sexier places like the Securities and Exchange Commission and the
Commodity Futures Trading Commission. Because Elizabeth Warren is a junior
member of the committee, it took about an hour and a half for her turn to
question the witnesses.
But when she finally got her turn, she did -- she made the most of it.
She asked a really, really, really good question, a question that has been
lingering ever since the financial crisis began.
(BEGIN VIDEO CLIP)
SEN. ELIZABETH WARREN (D), MASSACHUSETTS: I know there have been some
landmark settlements. But we face some very special issues with big
financial institutions. If they can break the law and drag in billions in
profits, and then turn around and settle, paying out of those profits, they
don`t have much incentive to follow the law.
It is also the case that every time there is a settlement and not a
trial, it means that we didn`t have those days and days and days of
testimony about what those financial institutions had been up to. So the
question I really want to ask is about how tough you are, about how much
leverage you really have in these settlements.
And what I would like to know is tell me a little bit about the last
few times you have taken the biggest financial institutions on Wall Street
all the way to a trial.
(END VIDEO CLIP)
KLEIN: When was the last time the federal government took a Wall
Street bank to trial? That is a great mystery of the financial crisis.
And it has never really been answered to my satisfaction. Why have there
not been more prosecutions, more trials?
And yesterday, the federal regulators in attendance had to come up
with an answer, and they had to do it under oath. Here is what happened.
(BEGIN VIDEO CLIP)
THOMAS CURRY, COMPTROLLER OF THE CURRENCY: The institutions I
supervise, national banks and federal thrifts, we`ve actually had a fair
number of consent orders. We do not have to bring people to trial or --
WARREN: Well, I appreciate that you say you don`t have to bring them
to trial. My question is when did you bring them to trial?
CURRY: We have not had to do it, as a practical matter, to achieve
our supervisory goals?
WARREN: Ms. Walter?
ELISSE WALTER, SECURITIES & EXCHANGE COMMISSION: I will have to get
back to with the specific information. But we do litigate and we do have
settlements that are -- that are either rejected by the commissioner or not
WARREN: OK, we have multiple people here. Anyone else want to tell
me about the last time you took a Wall Street bank to trial?
(END VIDEO CLIP)
KLEIN: No one did. No regulator could remember the last time they
took a Wall Street bank to trial. Biggest financial crisis in history, no
one had anything. And the answers the regulators did give didn`t seem like
that good answers to me. And they didn`t seem like great answers to
Elizabeth Warren either.
(BEGIN VIDEO CLIP)
WARREN: You know, I just want to note on this, there are district
attorneys and U.S. attorneys who are out there every day squeezing ordinary
citizens on sometimes very thin grounds, and taking them to trial in order
to make an example, as they put it. I`m really concerned that too big to
fail has become too big for trial. That just seems wrong to me.
(END VIDEO CLIP)
KLEIN: Joining me now is "ProPublica" senior reporter and "New York
Times" deal book columnist Jesse Eisinger, a Pulitzer Prize winner for his
reporting on questionable Wall Street practices that caused the financial
Jesse, it is good to see you.
JESSE EISINGER, "PROPUBLICA": Hi. Thanks for having me.
KLEIN: So, I want to start with a very basic question. Could these
regulators have taken more banks to trial? Did they have the authority,
the power, the cause?
EISINGER: Of course. The SEC can take banks to trial civilly. And
they can refer cases criminally to the Department of Justice. Now, that is
really where the crux of this lies, is that the power here and the
disappointment is mainly with the Department of Justice, why they haven`t
brought more cases against the banks, either civilly or criminally, and why
they haven`t brought C-suite people, the CEOs, the CFOs, major bankers to
trial for their actions.
KLEIN: So now, let`s go into that why. I know you have asked people
this. Why didn`t they? Why -- why are there no examples, as there were
after the Great Depression? Why are there so few or no examples of a
serious trial, or anybody going to jail?
EISINGER: It is an appalling failure. And the reason is that -- one
reason is that the Securities and Exchange Commission is running scared. I
think they don`t have much trial experience. They have lost trials. They
brought a mid-level Citigroup banker to trial in a complex mortgage
security case a few months ago and lost. That terrifies them.
The Eastern District of the Department of Justice brought a case
against two low level Bear Stearns hedge fund managers. They lost. So
losing really scares the devil out of these guys.
But the real question -- the real thing is that they have been afraid
either to indict companies because they think that will put them out of
business and they think that will cause systemic problems, or they`re
afraid that these things are complex. They don`t necessarily understand
them. They are worried that juries won`t understand them.
And they think well, it is hard to prove that there were any crimes
KLEIN: So I have heard that, too. And I heard that particularly back
a few years ago, that they didn`t want to do a lot of what Treasury
Secretary Tim Geithner liked to call Old Testament justice, because they
were worried that when the financial system was weak, it would weaken it
further, that we needed to get the credit markets back up, and that was the
The financial sector is a lot stronger now. Their profits look pretty
better. They`re in significantly better shape. So is this just over, like
the statute maybe not of limitations but of political limitation has run
out? Or is there still the possibility that there is new leadership, I
believe, at the SEC -- is there still the possibility that we will see some
of these trials going backwards?
EISINGER: I am deeply skeptical about it. I think the ship has
sailed. And I think that the reason is that, one, statute of limitations,
but that is not actually a real issue, because they have other statutes
under which to bring these things. But I think that the investigations
have largely gone dry.
Lehman Brothers has largely gone dry. AIG has gone dry. Now note,
there was no systemic implications for prosecuting people involved in AIG
or Lehman because they were out of business. Or AIG wasn`t out of
business, but the individuals had left. Lehman was out of business. So
that is a poor excuse.
Now whether these -- we`ve seen the DOJ in Los Angeles just bring a
case against Standard and Poors, the credit rating agency, for activities
leading up to the crisis. So there may be trickling in here and there.
But there are going to be no major cases brought against Citigroup, J.P.
Morgan, Merrill Lynch, for any of their -- Lehman, Bear Stearns, for any of
And that leaves us with a big question mark of what the activities
were leading up to the financial crisis.
KLEIN: Jesse Eisinger, thank you for depressing me-holes tonight.
EISINGER: Thank you.
KLEIN: Now, why 17,000 miles is close in space, and why there were so
many fireballs in the sky the other day. Bill Nye the Science guy will
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Corporate profits have
skyrocketed to all-time highs. But for more than a decade, wages and
incomes have barely budged. Tonight, let`s declare that in the wealthiest
nation on Earth, no one who works full-time should have to live in poverty,
and raise the federal minimum wage to nine dollars an hour.
(END VIDEO CLIP)
KLEIN: To understand the case for a minimum wage increase, to
understand why the minimum wage matters unusually right now, you need to
understand this graph. That red line shows what has been happening to
corporate profits since 1970. It`s what corporations are making. And the
blue line is labor share of the income. It is what workers get.
That red line, that corporate line, that has been going way up. Way
up. Profits for big businesses are booming. But the average worker`s
share of the spoils, the blue line is falling. So corporations are making
more, but workers -- workers are getting less.
Now here is what that actually means, workers are losing their power
in the economy. They are losing their power. They are losing their
ability to go into the boss` office and say I need a raise, and you need to
give it to me.
Now you can blame any number of things for that, machines doing jobs
people once did, loss of union power, globalization. But it all -- in the
end, it all comes down to the same thing, workers losing their power, which
means losing their ability to bargain for higher wages.
And this problem has only been getting worse since the recession
ended. A study done just last month by the University of California
Berkeley tells us, quote, "the top one percent captured 121 percent of the
income gains in the first two years of the recovery."
I`m going to say that again. The top one percent, they captured 121
percent of the income gains in the first two years of the recovery. Now,
how did the one percent get 121 percent of the income gains? Because the
99 percent saw their incomes fell. Now they fell a bit, but they fell,
even as the economy was recovering, even as the country was growing again,
even as corporate profits were hitting record highs.
The people who lost the most power in the economy are the folks at the
very bottom of the economic ladder, the folks making minimum wage, the
folks without many skills. And that is what the federal government is
trying to correct when it raises the minimum wage. It is doing for the
least powerful workers what they don`t have to power to do for themselves,
demand a raise and get it.
Minimum wage increases are not perfect policy. They don`t have a big
effect on employment in either direction. But if they have any effect, it
is a little bit negative. Some small businesses really can`t afford to
increase wages for their workers. Some big businesses, if they have to pay
a little bit more money to a lot of people they employ, they might try to
automate those jobs. Say they`ll move away from human cashiers and install
A lot of economists, including, at least at one point Paul Krugman,
will tell you it is better to use the tax code to increase workers` wages.
They`ll say that the right way to respond to that graph is to tax those
profits and tax the rich Americans getting those pay increases, and use
that revenue. Use it to send a check to Americans working for low wages,
not just minimum wage, but low wages all across the board.
That way you don`t hit small businesses that can`t afford it. You do
get a contribution from big, mega-profitable businesses that don`t hire
minimum wage workers. And that is what the Obama White House believed,
too. You`ll notice, they didn`t push a minimum wage increase in the first
term. They tried to use the tax code. First there was the Making Way Pay
Tax Cut, which was part of the stimulus. It gave a refundable tax credit
of up to 400 dollars for working individuals and up to 800 dollars for
But Republicans refused to renew it in 2011. Next, the president
tried a cut in the payroll tax, but the Republicans and some in the
president`s own party refused to extend that into 2013.
Now those kinds of policies, they actually help every worker, not just
the ones making the least. But with no more big options like those on the
table, of course the administration is turning to an increase in the
Now maybe that increase won`t pass. In fact, it very likely won`t
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), HOUSE SPEAKER: When you raise the price of
employment, guess what happens? You get less of it. In a time when the
American people are still asking the question, where are the jobs, why
would we want to make it harder for small employers to hire people?
(END VIDEO CLIP)
KLEIN: I just want to say the research is not nearly that clear. But
-- but he does control the House of Representatives. So it might not pass.
But you know what else the minimum wage is? It is really popular,
incredibly popular, one of the most popular policies in American
government. It often polls in the 70s or 80s.
If a minimum wage increase never makes it out of the Republican-
controlled House, you can pretty much guarantee Democrats will remind
voters of that over and over and over again ahead of the 2014 midterms.
They will hammer Republicans with the minimum wage. And then if they win,
they will get their minimum wage increase.
That is exactly what happened to Republicans in the 2006 election, and
led to George W. Bush -- George W. Bush signing a minimum wage increase
into law in 2007. Because that is the thing, even as the 99 percent lose
their wages in the economy, they`re not losing out their power in our
democracy. And so if Republicans don`t like the minimum wage as a policy,
if they want something better, then they need an alternative. They need an
answer to the graph.
They need an answer to workers losing their power. Because the market
isn`t fixing this on its own. And because this graph is not just about
economics, this graph is about politics, too, you can`t have that blue line
go down for much longer before people decide it is time to go to the ballot
box and do something big to stop it.
Meteorites in Russia, a near Earth asteroid and Bill Nye the Science
Guy, that is next.
KLEIN: Something a little weird about Russia is that tons of Russians
have video cameras mounted in their cars, like as if at any moment Ashton
Kutcher might run up to them and say, I`m filming an episode of "Punked"
and I need your help. The reason that Russia has so many cameras in their
cars is that the gridlock is incredibly bad, and there are a ridiculous
number of traffic accidents. There are so many hit-and-run claims that
Russian insurance companies now refuse to cover damages unless the drivers
can completely prove who the offender is.
And how do you prove the offender beyond a shadow of a doubt? With
your dashboard camera, of course. Today, though, those dashboard cameras
caught something even scarier than traffic. During this morning`s commute
in the city of Chelyabinsk in central Russia, something unusually crazy
happened, something beyond the morning traffic and the existence of
During that commute, a fire ball, a meteorite fell to Earth, damaging
about 3,000 buildings and injuring more than a thousand people. But most
of the injuries were from shattered glass. Then just 14 hours later -- 14,
in a completely separate and unrelated event, an asteroid about half the
size of a football field came within 17,200 miles from the Earth.
In science terms, 17,200 miles is not very far. There are weather
satellites farther away than that. Scientists say that if Asteroid
2012DA14 hit the Earth, it would have been a thousand times more powerful
than the nuclear bomb that hit Hiroshima in World War II.
Last time an asteroid the size of 2012DA14 hit the Earth was in 1908,
when, once again, Russia was the target. That asteroid wiped out 820
square miles of trees.
The best way to put this is, I am terrified. So I felt better when my
friend and colleague at "the Washington Post" Brad Plumer, who is good at
all the science stuff, wrote, "do we really need to add tiny killer meteors
to the list of things to fret about? Probably not."
He went on to explain that meteorites like the one that hit Russia
today usually hit uninhabited places. After all, a lot of the Earth is
ocean. In fact, there is no documented case of a person being killed by a
meteorite. So problem solved. It was. I felt better.
But then another friend and a friend of the show, "Wired`s" Spencer
Ackerman, began his piece today, and I quote, "space is out to kill you."
Spencer. And he went on to say that the whole Armageddon scenario in which
we try to blow up an asteroid that`s coming at us, it will not work. We
cannot do that. We do not have the technology.
So now I don`t know what to believe. Are asteroids and meteorites out
to kill us? Or are we totally safe and we can do something about it?
There is only one man -- one man who can clear up confusion of such an
apocalyptic measure. And thank God he is here tonight.
Joining me now, Bill Nye the Science Guy. Bill Nye, it is an honor to
BILL NYE, THE SCIENCE GUY: Ezra, it is great to see you. And the
answer to your question -- are we perfectly safe, is the universe out to
kill us -- is somewhere in between.
KLEIN: Well, that`s not --
NYE: There is no evidence -- say again.
KLEIN: That is not all that comforting. I wanted to be perfectly
NYE: Oh, but here is the deal. We humans, through the process of
science, the best idea humans have ever had, we can do something about it.
So here is the idea. The -- by the way, asteroid 2012DA14 was discovered
by a grant from the Planetary Society. I admit, I`m biased, I`m CEO. And
we supported these guys in Lasagor (ph), Spain, who were very diligent
And they have developed techniques for finding these relatively small,
relatively fast moving objects like 2012DA14. Now it represents -- the
number that we have catalogued represents about one percent of the
asteroids that are out there of that class. So there are another 99
percent that could do damage that would be -- what I like to call a city
A little bit bigger than that, you have a county killer. A little
bigger than that, you have a country killer. Not so much farther, you have
a world killer. So what we can do, if we can assay these, if we can survey
these and make a catalogue, we can do something about it, as long as we
have enough time.
KLEIN: What can we do? Well, if we found a county killer coming up,
what could we do?
NYE: Three things, the key is you want to go out there and just ever
so slightly slow it down or ever so slightly speed it up, so that when it
crosses the Earth`s orbit, we are not there, the Earth is not there. And
so we`re talking about millimeters per second in the change of speed. By
the way, if you like to worry about things, and we all do, 15 minute`s
difference would have made the difference between getting hit and not
getting hit today by Asteroid 2012DA14.
Quite the coincidence, quite the cosmic shooting gallery coincidence
that there was this other bull light or daytime meteor in Russia. So what
we want to do is get out there and nudge it. You can do it by just
slamming a rocket into it. At the Planetary Society, we are doing a study
where we shoot lasers at it with an armada, a flotilla, a network of small
spacecraft with lasers on them, powered by the sun, that would cause the
surface to volatize, to evaporate. It would be a little jet, a little
space borne rocket motor that would nudge it off course.
Or you can, in Armageddon fashion, go out there with something akin to
a nuclear weapon and just set it off, hoping that you`re not going to screw
it up and create a shower of these things, which could be even worse. But
we are the first generation of humans that can do something about it. So
yes, a very scary day. But in a sense, an exciting day.
And so right away, Congressman Lamar Smith from Texas, a conservative,
said let`s convene an asteroid meeting. And we are all in. Let`s go.
Let`s figure out what to do.
KLEIN: I would like the asteroid meeting. And I`m excited for the
floating armada of sun lasers.
Anyway, Bill Nye the Science Guy, you get THE LAST WORD tonight.
Thank you so much for being here.
NYE: Thank you.
KLEIN: I`m Ezra Klein, in for Lawrence O`Donnell. You can read more
of my work at WonkBlog.com. "THE ED SHOW" is up next.
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