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'The Last Word with Lawrence O'Donnell' for Tuesday, February 26th, 2013

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THE LAST WORD WITH LAWRENCE O`DONNELL
February 26, 2013

Guests: Nia-Malika Henderson, Steve Brill



EZRA KLEIN, GUEST HOST: Tonight, Washington presents us with
something of a paradox, a political Zen koan. How can nothing be the
biggest news of the day?

(BEGIN VIDEOTAPE)

JON STEWART, COMEDIAN: So what happens if this sequester kicks in?

REP. NANCY PELOSI (D-CA), DEMOCRATIC LEADER: Sequestration equals
unemployment.

UNIDENTIFIED FEMALE: Fear not, Congress is back to work.

CHRIS JANSING, MSNBC ANCHOR: There are no 11th hour meetings, no real
negotiations.

UNIDENTIFIED MALE: Negotiations never begun.

JANSING: I don`t sense a lot of urgency.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: We have moved the
bill in the House twice.

PELOSI: I remind them, that was a different Congress.

BOEHNER: We should not have to move a third bill before the Senate
gets off their ass.

(INAUDIBLE)

UNIDENTIFIED MALE: You should.

UNIDENTIFIED MALE: Can you hold (INAUDIBLE) for me.

BOEHNER: Before the Senate gets off their ass.

UNIDENTIFIED FEMALE: The quote of the day.

ALEX WAGNER, MSNBC ANCHOR: In the end, it is a battle of optics.

PERINO: The Republican leadership says what would pass bills next
year.

BOEHNER: We should not have to move a third bill.

CHUCK TODD, MSNBC ANCHOR: There is no House bill --

PERINO: That was a different Congress.

TODD: -- with this Congress.

PERINO: Get the job done.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: This is a chance to do the
big bill.

TAMRON HALL, MSNBC ANCHOR: This is the mixed message we see from
Republicans.

BOEHNER: The president gets more money, they`re just going to spend
it.

GRAHAM: I`m willing to raise $600 billion.

BOEHNER: He`s gotten his tax hikes.

HALL: They`re seeing it I guess with double digits.

UNIDENTIFIED MALE: So the Republican Party is probably in worse shape
--

UNIDENTIFIED MALE: They`re out of touch.

UNIDENTIFIED MALE: -- than they were on election day.

UNIDENTIFIED MALE: They`re out of touch with the American people.

UNIDENTIFIED MALE: They have a brand problem.

TODD: Chris Christie not invited to CPAC.

UNIDENTIFIED MALE: Not invited to CPAC.

UNIDENTIFIED MALE: The CPAC convention is increasingly the "Star
Wars" bar scene of the conservative movement. All that`s missing in that
convention is a couple of Wookiees.

TODD: Excuse us?

STEWART: So what happens if this sequester kicks in?

REPORTER: Fewer FBI agents, fewer air traffic controllers, meat
shortages that could jack up prices.

STEWART: (EXPLETIVE DELETED)

(END VIDEOTAPE)

KLEIN: I just want to state first as a matter of LAST WORD policy,
there is nothing wrong with Wookiees, we love Wookiees.

The big story today in Washington is that nothing is happening,
nothing at all. And that may not seem like a big story, right? A nothing
happening. How could that be a big deal?

But if you have been through a lot of these budget showdowns, and I`ve
been through a couple of them now, usually, 24 hours or three days or a
week before something really bad is going to happen, something is
happening.

This is the fifth budget showdown between President Obama and
congressional Republicans since 2011. And they usually all look the same
right now. In these final days, yes, there is posturing. It doesn`t stop.

But the real focus, the real activity moves to frenzied, almost around
the clock negotiations. But not this time, there are no negotiations
happening. No negotiations at all, actually.

Everyone is talking. In fact, they`re talking a lot. They`re just
not talking to each other.

Today, President Obama flew to Virginia, where he said this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: All we`re asking is to
consider closing tax loopholes and the deductions that the speaker of the
House, John Boehner, said he is willing to do just a few months ago. He
said there were a bunch of loopholes and deductions you could close, said
you could raise $800 billion or $1 trillion by closing loopholes.

I don`t think that`s too much to ask. I do not think that is
partisan. The majority of American people agree with me. The majority of
Newport News agrees with me. We need to get this done.

(APPLAUSE)

(END VIDEO CLIP)

KLEIN: Speaker Boehner, your turn.

(BEGIN VIDEO CLIP)

SCOTT PELLEY, CBS NEWS: To be clear, no revenue increases.

BOEHNER: We`re not -- the president got his tax hikes in January.
Federal government will have more revenue this year than any year in our
history. It is time to tackle spending, period.

(END VIDEO CLIP)

KLEIN: OK, we need to stop here for a minute.

Speaker Boehner is playing real loose with those numbers. What he
said, if you listen, what he said is narrowly true, because we have
inflation in this country, most countries and economic growth. And that
means any revenue number today will be bigger than any revenue number a
decade ago or two decades ago, even if taxes were much higher.

And so, we don`t usually measure taxes like that because it doesn`t
tell us anything. We measure taxes as percent of the entire economy,
because then we can compare them over time, and taxes measured that way
measured the right way are definitely not that record highs.

Here is a graph, the final number is what the Congressional Budget
Office expects the number to be this year as a percent of the economy, 16.9
percent -- yes, not the highest ever. That was about 20 in 2000.

Anyway, because Speaker Boehner won`t agree to raise revenue,
Washington is doing nothing to stop the sequester. A sequester that is
really unpopular.

According to a newly released NBC News/"Wall Street Journal" poll, 21
percent of the Americans believe the automatic spending cuts are a good
idea. I would like to meet them and ask why. And 52 percent say they are
a bad idea. So, we`re doing nothing, nothing at all about the bad idea.

Instead, Speaker Boehner is saying this.

(BEGIN VIDEO CLIP)

BOEHNER: We have moved the bill in the house twice. We should not
have to move a third bill before the Senate gets off their ass and begins
to do something.

(END VIDEO CLIP)

KLEIN: I don`t think we all need to run to the fainting couch every
time a legislator says a bad word, but that is not exactly the kind of
approach that leads to a productive negotiation in the Senate.

Meanwhile, the Senate actually is planning to vote on a bill this
week.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: I think he should understand
who is sitting on their posterior. We`re doing our best here to pass
something. Our bill would reduce the deficit by having some smart spending
cuts, with filling some of the tax loopholes that certainly should be
filled. We`re going to vote on this, our proposal, this week and we`ll get
a majority of the Senate to vote for that.

(END VIDEO CLIP)

KLEIN: Look, that`s the kind of bill the president wants. It is the
kind of bill he campaigned on. He won on. It`s also the kind of bill that
Speaker Boehner has explicitly rejected.

So, what we need to say are actual negotiations between the White
House and John Boehner because Senate Democrats will accept whatever the
White House signs off on. And Senate Republicans will agree to any deal
that Boehner blesses, having Boehner`s House and Reid`s Senate separately
passes bills the other does not like, which is a process Boehner is arguing
for here, bills that go nowhere, get us -- well, nowhere.

But Speaker Boehner refuses to negotiate. This is literally his
announced policy right now. He won`t talk to the White House.

According to Jake Sherman in "Politico," the way Boehner sees it is
that, quote, "to jump start negotiations with Obama, and he would be
slammed for engaging in out of sight secret talks with the president his
party does not trust. Raise taxes and Boehner`s courting trouble in his
conference and endangering his very speakership. Both are simply
nonstarters."

Think about that -- it is a nonstarter to negotiate and it is a
nonstarter to compromise.

So what is left? Well, the sequester is left.

Joining me now is "Huffington Post" editorial director and MSNBC
political analyst Howard Fineman, "Washington Post" national political
reporter, my colleague, Nia-Malika Henderson.

Thank you both for being here tonight.

NIA-MALIKA HENDERSON, THE WASHINGTON POST: Great to be here.

HOWARD FINEMAN, THE HUFFINGTON POST: Thanks, Ezra.

KLEIN: Howard, if you`re not going to talk, if you`re not going to
negotiate with the White House, what do we do? How do you get out of it?

FINEMAN: Well, what you do is talk to the rest of the country, which
is what`s happening right now. I was over at the White House today. It`s
crickets, as you would describe. There`s nothing going on.

And it`s -- we`re sort of in a situation where everybody is in the
canoe which is about to go over the water fall and nobody is paddling.
What are they doing to start negotiations? Nothing on either side, from
what I can tell.

And everybody is now moving to what they assume is the next phase,
which is the sequester goes into effect on Friday. We see what happens,
world saved, world doomed. You know, how dramatic it will be, probably not
so immediately dramatic in most cases.

But I think the White House feels that the pressure will build over
the days and weeks, especially as the effect of the sequester becomes plain
in the military. In terms of civilian layoffs in the Pentagon, and in
terms of readiness around the world, including in the Persian Gulf, then
the White House thinks the Republicans will crumble because they won`t be
able to take the defense cuts.

We`ll see.

KLEIN: And the thing that I think that misses, Nia-Malika, are not
misses, but the thing that I think we miss when we look at the sequester on
its own is at the end of the month, we have a fight over how to fund the
government, at the end of March, March 27th, I believe, something around
there, called the continuing resolution.

HENDERSON: Right.

KLEIN: And if we don`t pass one, the government shuts down. I don`t
understand how we`re going to pass the continuing resolution if we haven`t
even figured out the sequester beforehand. It seems to me that a shutdown
is very likely, the place that all of this is going to come together and
get resolved.

HENDERSON: Right. And that`s what the Republicans are betting on. I
mean, there is this, you know, sort of this gaming narrative is actually
going to be, Obama obviously thinking that the world will end in some ways
and that people will then move and buckle. Republicans thinking that after
this happens, Obama will start to get the blame and he`ll buckle.

But there also is the sense that it`s the continuing resolution that
everything will get done then. But again, how does it happen when you have
these sides that are so wide apart in terms of what they want to happen?

Republicans are refusing on tax hikes and Obama not wanting to see
some of these drastic cuts and insisting on tax hikes.

KLEIN: And one of the things I thought was fascinating that Obama did
today, Howard, is that the Senate Republicans have talked about giving him
the ability, the power, to move the sequester cuts around, to sort of
decide how they get apportioned. And I want you to hear what he said about
that plan, because I think it`s big news.

(BEGIN VIDEO CLIP)

OBAMA: Lately, some people have been saying, well, maybe we`ll just
give the president some flexibility, he can make the cuts the way he wants
and that way it won`t be as damaging. You know, the problem is when you`re
cutting $85 billion in seven months, which represents over a 10 percent cut
in the defense budget, in seven months, there`s no smart way to do that.

And the broader point is, Virginia, we can`t just cut our way to
prosperity.

(END VIDEO CLIP)

KLEIN: So why don`t they want that authority?

FINEMAN: Well, they don`t want that authority for the reason the
president said, not just in terms of defense but in terms of domestic
spending, where there are also very deep cuts. And the way one White House
official put it to me, he said that`s great. They`re going to give us the
finger -- the power --

KLEIN: Might give them that, too.

(LAUGHTER)

FINEMAN: They`re going to give us the power to decide which finger to
cut off. You know, do you cut Head Start, do you cut early childhood
education, and then feeding programs and so forth? So they see it as a
political trap.

But I also agree with you, Ezra, that even if somehow they`re forced
to the table by the sequester, which is questionable, there are these other
trip wires that are coming.

And I don`t see why anybody should assume that suddenly the Democrats
and Republicans and the president and John Boehner are going to say you
know what? Forget all about that. Let`s just sit down now. You have got
the continuing resolution at the end of the month. And I hate to say it,
but there is a debt ceiling thing coming up in the summer, as well. And
the way the White House puts it, they think the sequester is the least
dramatic of the impacts.

That the shutting of the -- continuing resolution, which could shut
down the government altogether is terrible and the debt ceiling is
America`s credit in the world.

HENDERSON: Right.

KLEIN: But I think that`s actually a huge question, right, because
one reason I think things might come down to a government shutdown, the
continuing resolution, is that the White House doesn`t -- you can`t get a
resolution off the sequester itself. And they are terrified of moving all
of this to another debt ceiling, to have it in this kind of middle ground,
bad enough to force us to do something. Not bad enough to crash a global
economy might end up looking perversely attractive.

HENDERSON: Right, it may be the best of terrible options, right? I
think one of the things about this crisis, it is uncharted territory. You
talk to Republicans, they will lay out something of a scenario. But then
you push them hard enough, they`re like they have no idea what they really
want to see happen going forward.

FINEMAN: I think -- I think actually I would put it in just the
opposite terms. It`s all too charted territory, by which I mean everybody
is so locked into the positions that they`re in, politically, that John
Boehner can`t afford to give up on revenues. The president doesn`t want to
concede too much ground on entitlements. And he is right, he has put
forward a balanced program, they`re not buying it.

KLEIN: Nia-Malika Henderson, Howard Fineman -- thank you guys for
being here tonight. I feel like we`re going to be talking about this a
lot.

FINEMAN: Thanks, Ezra.

KLEIN: So where does this latest -- not really a crisis but kind of a
crisis leave the president and Congress? It is like they`re going back in
time to 2011. But what will the Republicans win? They don`t have
President Obama to defeat in 2016. That is next.

And later, there is a ship, literally on the loose. It has no one
driving it and it is just sitting in the ocean. The story behind it is
coming up.

(COMMERCIAL BREAK)

KLEIN: It feels like deja vu all over again with Republican political
strategy that`s just back in 2011. But why would you do the same thing,
after the election. The election you lost is over. What is the win here?
I will ask Steve Schmidt.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: The other thing we`ve got to do is to stop having these crises
manufactured every month. It seems like -- I know you guys must get tired
of it. Didn`t we just solve this thing? Now we`ve got another thing
coming up?

(END VIDEO CLIP)

KLEIN: So I had one of these didn`t we just moments today when I was
going through the new NBC News/"Wall Street Journal" poll that shows the
fallout from this sequester fight.

First, the president`s approval rating is dropping. His approval
rating is down to 50 percent from 53 percent in December. While his
favorability rating has dropped four points.

But the Republicans` ratings are way worse, just 29 percent of a
positive view of the Republican Party. Well, 46 percent, 46 percent,
almost twice as many have a negative view, a net negative favorability of
minus 17 points, you don`t want that minus sign there.

Didn`t we just see the poll trend back in 2011?

The polling on the sequester showdown for both the president and the
Republicans looks really similar to the poll trends of the debt ceiling
showdown. Here is the NBC News/"Wall Street Journal" poll taken at the end
of March 2011, before everybody had unfortunately to hear about the debt
ceiling.

In March 2011, President Obama`s job approval rating is at 49 percent,
45 disapprove. Fifty percent have a positive view of the president, 36
percent have a negative view of him. That is a net positive of 14 points.
It`s pretty good.

Meanwhile, 31 percent have a positive view of the Republican Party,
while 43 percent have a negative view of the GOP. For a net negative
favorability of 13, minus 13. It`s not good.

So in March 2011, the president, fairly popular, has a long way to
fall, while Congress is basically at rock bottom. Republicans in Congress
are not popular people. So, in 2011, if you were a Republican in Congress
and your objective was this --

(BEGIN VIDEO CLIP)

BRET BAIER, FOX NEWS: You said, quote, "The single most important
thing we want to achieve is for President Obama to be a one-term
president."

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: Well, that is true, my
single most important political goal along with every active Republican in
the country.

(END VIDEO CLIP)

KLEIN: So that is what your objective was, what you wanted to get
done. The political reaction was clear, you take one for the team, you
tried to pull President Obama down, mire the candidate of hope and change
in the Washington morass, because even if the poll numbers for a
congressional Republicans go down, the president`s will go down more,
because he`s got further to fall. The Republicans can just nominate a
fresh face, some outsider not connected to their unpopular congressional
wing and win the White House with him. And that is what exactly began
happening in the great debt ceiling debacle.

By the end of August 2011, President Obama`s job approval had been
turned upside down, 44 percent approve, while 51 percent, a majority, 51
percent disapproved. His favorability advantage had been erased entirely -
- 44 percent a positive, 44 percent a negative view. It was not good for
him.

But the Republican Party`s favorability had gone down a bit, too.
It`s now a negative 14 points, instead of simply 13. They didn`t have far
to fall, but they fell a little bit further. But if you`re Republican and
your number one goal was to make Barack Obama a one term president,
increasingly, the number of people in America who think Congress is doing a
terrible job from 3/4 to 4/5 is a small price to pay for taking a wrecking
ball to the popularity of the Democratic president currently running for
president.

And that strategy at that time was working, at that point in August
2011, Mitt Romney pulled ahead of President Obama in matchup polls. He was
leading. The outside Washington, Republican presidential candidate seemed
perfectly positioned to make Barack Obama a one-term president, just like
Mitch McConnell wanted. And then Mitt Romney lost the election.

The president, President Obama, was reelected. He will not be a one-
term president. The Republicans will never another chance to defeat Barack
Obama on the ballot, because he will never again be on a ballot. So, what
is their plan now? Because it can still be this.

(BEGIN VIDEO CLIP)

BAIER: You said, quote, "The single most important thing we want to
achieve is for President Obama to be a one-term president".

MCCONNELL: Well, that is true, that`s my single most important
political goal along with every active Republican in the country.

(END VIDEO CLIP)

KLEIN: During the debt ceiling, I could understand Republicans in
Congress dragging everyone down into the mud. It was a means to an end.
It was a rational means to an end.

But now in 2013, Republicans have a net negative of 17 points, 17
points in their approval ratings. And their party, unlike President Obama
is actually going to be on a ballot again, and soon.

Joining me now to try and figure out what they`re doing is MSNBC
political analyst, Steve Schmidt, a senior adviser for the McCain-Palin
campaign in `08, and senior strategist for the Bush-Cheney campaign in
2004.

Steve, I appreciate you being here.

STEVE SCHMIDT, MSNBC POLITICAL ANALYST: Good to be with you, Ezra.

KLEIN: So walk me through this, what is the point of taking this kind
of damage, of taking unpopular positions and forcing other showdowns
against President Obama? How does this sort of help in the long-term
recovery of the Republican Party?

SCHMIDT: Well, just look at the politics of it, you`re looking at it
through the prism of the national politics, what is the standing of the
party broadly in the electorate, and that`s different than the Republican
conference politics in the House. Overwhelming majority of t Republican
members of Congress represent districts where President Obama was defeated
badly. They`re responsive to their constituents in those districts.

And Republicans, if you look at the culture in the Republican Party
since the 2008 election, Republican members of Congress are terrified of
compromising, lest it beget a primary challenge that could take them out of
their seat. And that fear is very much alive today.

So when you look at the politics of it and you consider that if John
Boehner agreed to increase revenues as part of a broader deal with the
president, the consequence is probably at this point that he would lose his
speakership as one U.S. senator pointed out today.

So the politics of the Republican Party`s brand, its position heading
into the next presidential election is a very different matter than the
politics driving the political decisions inside the House Republican
conference, for instance.

KLEIN: But how far can that go? I mean, when I look at the polling
on some of these issues, you often see majority of actual self-described
Republicans saying they would approve of increasing taxes on the rich. And
the big Pew poll that came out a few weeks ago, you saw very few Republican
majorities for cutting spending on anything.

And certainly not on the major congressional ticket items like
Medicare.

So, it often seems to me the congressional Republican Party is to the
right of the Republican Party nationally, or at least to the right of
people who describe themselves as Republicans in national polls. Or am I
missing something here?

SCHMIDT: Well, look as you go through the polls and you sit in focus
groups and you watch it. And you`ll have a Republican respond and say is
that we have a spending crisis in the country that`s going to lead to a
debt crisis in the country. And we have to dramatically cut government
spending.

But when you begin to actually look at the programs, you begin to
consider the cuts that would be made, people change their tune and they say
wait a second. I`m a beneficiary of that. If you look at where government
money is going, a lot of it is going to rural states that are net
recipients of federal tax dollars as opposed to donor states that also
happen to be a big part of the Republican -- big part of the Republican
base. So, you know, there is a lot of dissonance between what people say
and what they want.

But there`s also this aspect of it. Republicans, members of Congress,
members of the Senate, are deeply concerned about what they view is out of
control spending, out of control spending during the Bush administration,
out of control spending during the Obama administration. And people
legitimately fear the consequences of that for the next generation.

So this isn`t all a made-up issue. This is a conviction issue for a
lot of Republican members of Congress. And they`re being responsive to
their constituencies.

KLEIN: Well, I think that is exactly right. But one thing I think
you`ve seen, too, is possibly this potential that the Washington
establishment of the party is a bit to the right of the party, nationally,
and in the states.

I mean, you saw Virginia Governor Bob McDonnell agree to raise taxes,
recently came under real fire for conservatives, and Chris Christie who`s
got a 74 percent approval rating in a blue state, and keynoted the
Republican National Convention is not invited to CPAC. I mean, to not
invite the guy who at the very least is managing to make it in a blue state
as a Republican governor, seems -- I can`t seem to explain it.

SCHMIDT: Well, when you look at the political consequences of the
numbers that you`re talking about, for the 2016 election, it makes a very
compelling case for a Chris Christie candidacy, because almost certainly,
the Republican Party is going to be better off with a nominee who comes
from outside of Washington, D.C., outside of the Congress, which would
point to a governor. And you have a governor who is a conservative
governor, been very effective, popular in the blue state, and has the
ability to change the electoral math for the first time in a long time to
the Republicans` benefit.

So I think when you look at the dysfunction that`s playing out, so
much of this is who`s up, who`s down. But I think as you pointed out, as
this fight goes on, both the president and Congress will be hurt. And it
makes the case for an outsider like Christie.

KLEIN: Steve Schmidt, you`re a very -- one of the very few people who
can almost make this stuff make sense to me. Thank you for joining me
tonight.

SCHMIDT: Thanks, Ezra.

KLEIN: The sequester cuts, government spending in a really stupid
way, but it doesn`t have to be that stupid. That is next.

And later, the hospital might cure you, but the hospital bill is going
to give you a heart attack.

(COMMERCIAL BREAK)

KLEIN: People say Washington is broken. That we don`t get anything
done. It is not true. We get lots of stuff done. The sequester is
getting something done. It is just a dumb thing to get done, a dumb thing
to do, a really dumb way to reduce the deficit, at any rate.

But this is the part of the show where I get to take two minutes and
tell you about anything I want to tell you. So I want to tell you about a
better way to do it. In fact, I want to tell you about 15 better ways to
do it. Do we have the clock?

OK, the Hamilton Project is a think tank here in Washington. And they
asked 15 experts to propose policies that meet two goals. They reduce the
deficit and they make the country better somehow. They do it by growing
the economy or by protecting the environment or something.

But here are my top five of their 15. Number one, a carbon tax. And
Hamilton suggested we use money, and a lot of it, to lower the corporate
tax rate, give some money back to low income households, and then cut the
deficit by about 200 billion dollars over 10 years. We could do all of
that while helping us fight global warming, which is a far larger threat
than the deficit.

Number two, get Medicare to stop paying providers for every single
thing they do, which gives them a reason to do more things, and begin
paying them for each patient. If the care is of high quality, they can
keep the leftover money as profit. It saves a bunch of money, and it
forces providers to think about how to treat patients, as opposed to how to
give out services.

Number three, all those deductions in the tax code, they do way more
for rich people than poor people. So make them credits that everyone who
pays income taxes can get. That makes the tax code a lot simpler, a lot
fairer and a lot more progressive. It also raises 2.7 trillion. We can
use most of that money to lower tax rates.

Number four, we used to fund infrastructure with a gas tax. That has
broken down. But Hamilton has a good idea. Fund it instead by making
people pay to drive on the most congested roads, something called
congestion pricing. They use it in Sweden. That way we fight traffic at
the same time we fund infrastructure.

And number five, the sequester cuts deep into Medicare, but it does it
in a really, really dumb way. I`m sorry, not Medicare, defense. Hamilton
has got a well thought through proposal for cutting as deep or deeper into
defense, but doing so in a way that is intelligent and tries to modernize
our military and focus on today`s threats, rather than yesterday`s.

Done. That`s it. I got plenty of time. You can read the whole list
at HamiltonProject.org.

The next time, though, someone tells you we have the best health care
system on the planet, ask them if they think it is best for a cancer
patient to have to pay nearly 85,000 dollars -- 85,000 in advance before
they can get proper treatment. Remind them that this is a patient who has
health insurance.

The writer of the huge cover story at "Time Magazine" explains why
medical bills are killing us. He joins me next.

(COMMERCIAL BREAK)

KLEIN: In the Spotlight, the unbelievable cost of modern medicine.
So a 30-year-old man, Oklahoma City, we`ll call him Steve H., suffered from
back pain. Nothing too uncommon about it. Eleven percent of adults in
this country get treatment for some kind of back pain. Steve decided to
have a neuro-stimulant, only about the size of a stopwatch, implanted into
his back.

This would be an in and out, same day surgery. It`s no big deal.
Steve wouldn`t even have to spend a single night in the hospital. Plus, he
was insured through his union, which had an annual payout limit of 60,000.
And he still had 45,181 dollars to spend. How much could a routine out-
patient procedure for a stop-watch sized thing cost?

Well, it cost Steve 86,951 dollars. And little did he know the cost
of the Medtronic Stimulator alone would wipe out his payout limit. Nobody
told him that it had a price tag of 49,237.

On top of that, Steve H. was charged three dollars for the marker used
to write on his back during surgery, 31 dollars for the table strap used on
the operating table, another 32 dollars for a blanket -- yes, a reusable
hospital blanket to keep him warm. And he had to pay 39 dollars for an
extra large hospital gown, not the one he wore, the surgeon`s gown. You
can buy 30 of those gowns online for 180 dollars, or for six dollars
apiece.

Unfortunately, Steve H.`s story is not uncommon. Steve Brill`s epic
"Time Magazine" cover story, "Bitter Pill, Why Medical Bills Are Killing
Us," takes a look at Steve H. and many other Americans struggling to pay
their hospital bills. In 26,000 words, which happens to be the longest
piece by a single author "Time" has ever published, Brill tries to explain
why health care costs Americans so very much money. And we are very glad
to have him here tonight to explain it to us.

Joining me now, "Time Magazine" contributor Steven Brill. Steven,
thank you for joining us.

STEVEN BRILL, "TIME MAGAZINE" CONTRIBUTOR: Hi, Ezra, how are you?

KLEIN: I`m good.

BRILL: Well, it is good that you`re good. Good you`re not sick.

KLEIN: I agree. It is a great article. I hope all of our viewers go
to read it. But if they don`t, it seems to me the summary is that if you
don`t have a large insurer bargaining on your behalf, like Medicare, that
you have no power in the marketplace. And hospitals, even nonprofit ones
with names like Mercy, are going to fleece you. Is that about right?

BRILL: Well, it is true. But even if you have a large insurer that
is not Medicare, that is a private insurer, that insurer is over-paying,
not as much as you would pay if you don`t have insurance. But they might
get a 50 percent discount off of the surgeon`s gown, which is still a
ridiculous price. You know, they`re being gouged also.

You know, the bottom line is that the hospitals, the drug companies,
the medical device makers all exist in something that is not a free market.
It is a seller`s market. And the buyers have no power, except for when
Medicare is involved, because Medicare is the giant buyer of them all and
exerts its leverage and operates in a really efficient way.

KLEIN: Your article, which I thought got at this very, very
beautifully, was strange to me in one respect, in that the entire thing
seemed to be an argument for single-payer medicine or Medicare for all.
The entire thing is about the success the government has bargaining down
prices, and showing that individuals and small insurers, and even as you
say, big insurers, cannot do it on their own.

But you never say in the piece that you think we should do single
payer or Medicare for all. Given -- given the analysis you put forward,
why is that?

BRILL: Well, there are two reasons. One is I wanted to avoid getting
caught up in the political fight. And the second reason, very frankly, is
that I think I was much stronger on my reporting than I was on my policy
analysis. Because unlike you, I am actually relatively new to this. In
fact, I actually noticed a piece of your reporting when I was doing it. I
think you did a comparison of what various medical devices and treatments
and drugs cost in the United States, versus everywhere else, which is, you
know, really a -- the contrast really just hits you over the head.

But I really think, you know, the thousands of comments I have gotten,
the blog posts I have seen, the video that you did with your colleague
today at "the Washington Post," have really made me think a lot more about
the policy prescriptions. And I think the next time I write about this, I
may get a little smarter.

KLEIN: Well, I`m looking forward to it.

BRILL: I hate to take away your questions and not be in an argument
with you, but I think you`re right.

KLEIN: No, no, I don`t want to argue. I want to hear from you. So
let me ask you this, we were talking about whether or not health care is a
market. And I want health care to be a market. But what I have come to
the conclusion -- my conclusion in reporting on this stuff is that what
separates health care from everything else is that we don`t have the
ability to say no. We are too afraid to say no to a treatment for us or
for our loved ones. When our insurers say no, we fight them and the
insurers eventually back down.

The basic problem is that unlike a TV or something else, we can`t just
walk out. And because of that, health care will never work the way a
normal market does.

BRILL: Exactly. That is the point I try to make. Not only can`t we
walk out, but we don`t even decide to walk in. We enter it completely
because we have to. You don`t wake up one morning and say gee, I think
I`ll wander over to the emergency room and see what they have on sale
today, the way you might if you were going to Walmart or to buy a pair of
shoes. It is not a marketplace.

That`s what I found. And the way I found it was just as you said, by
taking these bills and following the money and tracing the profits that
everybody makes in the system, except arguably for the nurses and the
doctors who actually provide the care. Everybody else is living in an
alternate universe. The rest of our economy is actually hard pressed, but
the health care economy is booming, and has been booming through the Great
Recession.

Everybody is just making money.

KLEIN: Steven Brill, your piece, I do want to say, is a great
example, I think, of what long form narrative journalism can do to take
things we think we know and show us a whole new side of them. So thank you
for doing that.

BRILL: Thank you.

KLEIN: Thank you for joining me tonight.

Stick with me here. I`m going to talk tonight about Jedi mind tricks
and why Ben Bernanke is kind of a master of them. Yes, I said Ben Bernanke
and I said Jedi. This is the debt story you have been looking for.

(COMMERCIAL BREAK)

KLEIN: The best thing that happened in Washington today is not going
to sound like the best thing when I tell it to you. It is going to sound
like a very boring thing. Federal Reserve Chairman Ben Bernanke testified
before the Senate Committee on Banking, Housing and Urban Affairs. And
please, please, please, don`t change the channel. I promise, it was great.

Ben Bernanke, a George W. Bush appointee, probably the single most
important economic policy-maker on planet Earth -- Ben Bernanke went to the
U.S. Senate, uncorked his light saber and said basically --

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Adventure, excitement, a Jedi craves not these
things. You are reckless.

(END VIDEO CLIP)

KLEIN: OK, but instead of adventure and excitement, he said austerity
and the sequester are making us reckless. Ben Bernanke is kind of like
Yoda. I mean, he looks more like Obi-Wan-Kenobe, which is why we made him
look more like Obi-Wan-Kenobe in this graphic, but he is like Yoda in that
he has got great power and he makes himself sound wiser by talking in ways
that are almost impossible to understand.

So we went through this whole hearing where Ben Bernanke went to the
Senate and told them, stop, stop it, you`re doing it wrong, you are being
reckless, and we got the best part for you.

But they are going to require a little bit of translation. Because
what Ben Bernanke said today was, by Washington standards, very radical.
It was radical and it was incredibly important, and the Senate should
listen to him. But he said it all in Bernanke speak. And you may not have
noticed for that reason.

Luckily -- and I don`t mean to brag -- I happen to speak Bernanke. So
here`s clip one.

(BEGIN VIDEO CLIP)

SEN. JOE MANCHIN (D), WEST VIRGINIA: Chairman Bernanke, thank you for
being here. First of all, when I first came to the Senate two and a half
years ago, I was in the Armed Services Committee. And Admiral Mullen at
that time was asked, what`s the greatest threat the United States faces.
And I thought I would hear some military challenge.

And he didn`t even hesitate by saying that the debt of this nation is
our greatest threat. And I didn`t know if you shared that same -- that
same thought.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: It is certainly an important
economic risk. And I think it is very important that over the longer term
that we develop a sustainable fiscal plan. No question about it.

MANCHIN: I mean, his assessment was it is the greatest threat we
face.

BERNANKE: I don`t know. There are many possible candidates for that.

(END VIDEO CLIP)

KLEIN: Senator Joe Manchin, Democrat from West Virginia, trying to
get Ben Bernanke, trying and failing, to sign on to the common D.C. conceit
that the debt is the top risk we face, more than climate change, nuclear
proliferation, pandemic, cyber war, anything. That was Ben Bernanke saying
very politely, no, senator, it probably is not.

So that is number one. Ben Bernanke went to the Senate and he just
said, you can`t just sit here and obsess about deficits all day.

(BEGIN VIDEO CLIP)

MANCHIN: It would be irresponsible for us not to do something. We
have two alternatives, two paths to take here, either fix the financial
problems in a longer term, bigger fix or do something with sequestering,
that we punished ourselves, basically because we have been unable as a body
to come together.

So I think that was also said, if we`re going to do a sequestering,
shouldn`t it be done in a more -- or smarter way, to where there is more
flexibility.

BERNANKE: What I suggested today is try to make some trade offs
between the effects on the near term recovery and getting -- aligning the
policy with the timing. The timing says that you have made progress in the
very near term as far as the budget is concerned.

Where the problem still remains unaddressed is in the longer term. So
it doesn`t quite match to be doing tough policies today, when the real
problem is a somewhat longer term problem.

(END VIDEO CLIP)

KLEIN: Again, so here`s the translation: Ben Bernanke just told
Manchin, you`re doing this in the complete wrong order. The key words
there, if you caught them, were "aligning the policy with the timing."
Bernanke just told the Senate you have done a lot of deficit reduction in
what he called the very near term, which is when we don`t need it. And you
have not done much at all about the long-term, when we do need it.

So what he said is it doesn`t match to be doing these tough policies,
these austerity policies today, when the real problem is long-term.
Washington`s decision to do austerity now and save the big deal for later
is just utterly wrong.

But it was really this third clip where Bernanke brought down the
hammer, and he drove home the one point that lawmakers really need to hear
right now.

(BEGIN VIDEO CLIP)

BERNANKE: The CBO estimates that deficit reduction policies in
current law will slow the pace of real GDP growth by about 1.5 percentage
points this year, relative to what it would have been otherwise. A
significant portion of this effect is related to the automatic spending
sequestration that is scheduled to begin on March 1st, which according to
the CBO`s estimates will contribute about six tenths of a percentage point
to the fiscal drag on economic growth this year.

Given the still moderate underlying pace of economic growth, this
additional near term burden on the recovery is significant. Moreover,
besides having adverse effects on jobs and incomes, a slower recovery will
lead to less actual deficit reduction in the short run for any given set of
fiscal actions.

(END VIDEO CLIP)

KLEIN: That is huge. What Ben Bernanke said and what the Senate
should frankly know by now -- but what he said is it would possibly be
cheaper and definitely, definitely, definitely more cost effective to be
doing more stimulus now and pairing it with deficit reduction later. More
stimulus, he said, would mean greater growth, which cuts the long-term
deficit. And that is what we`re worried about.

But doing what we are doing now, doing deficit reduction now,
austerity now, which hurts growth, and then, because it hurts growth, which
makes the long-term deficit a little bit worse, is a really dumb way to do
this.

Now, I want to be clear on what Bernanke didn`t say. He didn`t say
stimulus pays for itself. He said the most bang for the buck, the way to
construct the policy is help the economy now and pass deficit reduction for
later.

And he is right. It is just too bad he does not literally have a Jedi
mind trick he can use on Congress.

Up next, something has gone missing, something very, very big.

(COMMERCIAL BREAK)

KLEIN: Some interesting legal news in the wake of that Carnival
Cruise from two weeks ago. A Miami law firm filed a class action lawsuit
against Carnival on behalf of every passenger on board when the Triumph
broke down at sea. But an NBC news report in the fine print of the ticket
contract when you go on a Carnival cruise is this little guy: "guest agrees
that any arbitration or lawsuit against carrier whatsoever shall be
litigated by guest individually and not as a member of any class or as part
of a class action."

So that might make a class action suit a little tough. Instead we
could see more lawsuits from individual passengers, maybe even more fake
ones like this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Recently, the Carnival Cruise lines used the name
Triumph without my permission on their disastrous cruise. By doing so,
they have degraded my good name and cast negative dispersion on my persona.
It`s very distressing. From now on, people will only associate me with
poop.

One thing is for certain, the shopping on board the Triumph was
definitely not -- Conan, are you ready? You know it is coming.

CONAN O`BRIEN, "CONAN": Yeah.

UNIDENTIFIED MALE: International waters? Doody-free.

(END VIDEO CLIP)

KLEIN: But there is a new drama playing out on the high seas
involving yet another broken down cruise ship. And while that ship isn`t
carrying any people, that doesn`t mean it is without any passengers. This
cruise ship is, quote, apparently infested with rats, according to one
report, which in terms of horribleness is probably higher than snakes on a
plane.

(BEGIN VIDEO CLIP)

SAMUEL L. JACKSON, ACTOR: Enough is enough. I have had it with these
(EXPLETIVE DELETED) snakes on this (EXPLETIVE DELETED) plane. Everybody
strap in. We`re about to open some (EXPLETIVE DELETED) windows.

(END VIDEO CLIP)

KLEIN: The latest case of maritime malfeasance involves a Russian
cruise ship which has been adrift in the north Atlantic since -- get this -
- January 31st. Once used to take passengers through icy Antarctic waters,
here is the vessel being towed in happier times, before it was lost. It
was seized by authorities in 2010 at a harbor in Newfoundland, Canada,
because its Russian owners were accused of skipping out on 250,000 dollars
in unpaid fees.

Twelve months ago, it was sold to some buyers in the Caribbean. On
January 23rd of this year, a ship left the Canadian harbor towing the
derelict craft to the Dominican Republic, where it was to be scrapped. The
ship, refusing to accept its fate, broke from its towing cable the very
next day.

A week later, the ship was secured by a supply vessel. It got away
again. Canadian officials now say it is out of their waters, and no longer
their program. They also say the ship`s GPS system is broken, so they
don`t know where it is.

Meanwhile, we hear at THE LAST WORD spoke to the National Geo-Spacial
Intelligence Agency, which is part of the Defense Department. And on
Friday, the Canadian Coast Guard informed them that the rat ship was
spotted here well off the Newfoundland coast.

So we have a cruise ship of rats sailing the high seas, heading east,
probably, maybe somewhere about 1,300 nautical miles from the Irish coast.
For a reference point, here is where the wreckage of the Titanic is. So
way to go, rats. You have already managed to go further out to sea than
the Titanic.

Yo ho ho and a wheel of cheese, I guess.

That is THE LAST WORD for this Tuesday night. I am Ezra Klein, in for
Lawrence O`Donnell. You can read more of my work at WonkBlog.com. "THE ED
SHOW" is up next.

END

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