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'Up with Steve Kornacki' for Sunday, May 26th, 2013

Read the transcript to the Sunday show

UP with STEVE KORNACKI
May 26, 2013

Guests: Marin Cogan, Basil Smikle, Garance Franke-Ruta, Richard Kim, Frank Clemente, Ylan Mui, Matt Yglesias, Chris Geidner

STEVE KORNACKI, MSNBC ANCHOR: Good morning from New York. I`m Steve
Kornacki. The Newark "Star-Ledger" reported last night that the woman
brought in to fix the athletic department of Rutgers University after a
coaching abuse scandal, Julie Hermann, was herself accused of verbally
abusing players as the women`s volleyball coach at the University of
Tennessee 16 years ago. And the long, long awaited new season of "Arrested
Development" debuted on Netflix this morning, early this morning, which
means that hard-core fans are right now are on episode 11, possibly
enjoying the chicken dance.

Right now I am joined by Marin Cogan, contributing writer for "The New
Republican." Basil Smikle, adjunct professor at the Columbia University
School of Public Affairs and the former member of Hillary Clinton`s staff
in the U.S. Senate, Richard Kim, executive editor at the Nation.com. And
Garance Franke-Ruta, a senior editor of covering national politics at "The
Atlantic."

President Obama will visit the town of more Oklahoma today where he will
meet with families and first responders in the wake of Monday`s tornado
that killed 24 people. Town will also be hosting a public memorial service
tonight. High school graduations were held in Moore yesterday. At South
More High`s event attendees held up a photo of Terri Long while her
daughter walked across the stage. Long was among those who died in the
tornado.

None of these events are political in nature, but the tornado and the
political reactions to it have revealed in inner tension in the era of Tea
Party Republicanism. One of the most conservative states in the country is
going to be relying on federal funds to address this disaster. Earlier
this year, Oklahoma Senators Tom Coburn and Jim Inhofe along with three of
the states five house members voted against the special aid package for the
northeast after Hurricane Sandy. This week, Coburn said a disaster in his
home state won`t change his attitude, that federal disaster aid should be
matched by spending offsets, that is, by cutting money from something else.
Many lawmakers, however, disagree, including Democratic Senator Mary
Landrieu from Louisiana, the state that has seen its share of storms. 12th
GOP Congressman Tom Cole of Oklahoma, one of the two House members from the
state who did vote for the Sandy bill. And his district and hometown is
Moore.

Coburn and his colleagues may not have to vote on a special funding bill
this time around. The Federal Emergency Management Agency has $11 billion
in its disaster relief fund. It`s probably enough money to help Oklahoma,
but natural disasters like this won`t just stop happening. We`ve hardly
heard the last of this debate. And I guess that` what`s striking me about
this is, initially, you know, when we had the disaster this week, I think
there was an assumption we already (ph) that that means we`re going to have
to go to Congress and look for some kind of disaster bill, and it happens,
you know, this time, the damage is in such a concentrated area, I think,
compared to Sandy where it spread out over all these different states. And
it even went to the Caribbean for Sandy. That the price tag is not going
to be -- is not going to be as extensive. But it does feel like we address
these things on a case-by-case basis, whether it`s Katrina, you know,
whether it`s Joplin, Missouri, whether it`s Sandy. It happens this time,
there`s enough money in the fund, but I feel like we have this debate once
a year now where there is a disaster and the question is, wow, we need the
federal money, but we should offset the money. And, you know, it just --
it seems to me, you know, it`s a foolish way of addressing a disaster.

BASIL SMIKLE, COLUMBIA UNIVERSITY: Right, and, you know, I think what`s
interesting in going back to something that you said these senators did
vote against that initial package and then they`re saying, well, we don`t
need any more money, but you have the money there because of the fact that
people overrode your vote and put the money into FEMA. But what`s also
very startling is that they sort of are conflating these offsets with
bundling and putting money into some of this bills, but that may not
necessarily be relevant. But what -- the scary part about it is that
they`re referring to these packages as entitlements. And I think that`s
truly unfortunate, because these are people`s lives and neighborhoods that
need to be rebuilt. These aren`t entitlements and you shouldn`t be
demonizing people that actually do need this help.

KORNACKI: In the basic sort of anti-government language that we hear the
Tea Party address toward the government in general ends up getting
addressed toward a disaster relief.

SMIKLE: Right.

GARANCE FRANKE-RUTA, THE ATLANTIC: You know, I think what we`re seeing now
in Oklahoma is actually a validation of the natural disaster relief fund
strategy where you have the moneys there, so that they can be distributed
really quickly on the ground without having to go back to Congress. And
unfortunately, in Sandy, you know, the funds had run dry by the time Sandy
hit New York, and so I think it`s possible that in an era of climate change
where we`re seeing more dramatic weather events, more dramatic weather
events that we might just need to have greater money set aside for natural
disasters.

RICHARD KIM, "THE NATION": And we`re actually having less. I mean because
of the sequester FEMA`s budget is being cut by 8.2 percent this year. The
National Weather Service and NOAA, which played actually a heroic role in
that tornado and really got out warnings in time for people to go
underground or to go into sturdy shelters, they are furloughing thousands
of people because of the sequester. They already have a ten percent
vacancy rate at the National Weather Service, so, you know, the sequester
and the austerity regime is really going to impact this. And it`s just so
happens that it doesn`t this time around. We`ll see what happens during
hurricane season.

KORNACKI: And there is I mean, like -- you know, we`re making the point
here, it`s because the fund was somewhat replenished through the Sandy --
when the Sandy relief package went through. Part of that was to sort of
have this set-aside money for events like this. I want to go back there
and play sort of a before and after. This was Jim Inhofe back in December
when the Sandy bill was on the Senate floor.

(BEGIN VIDEO CLIP)

SEN. JAMES INHOFE, (R ) OKLAHOMA: I come from Oklahoma. We have disasters
all the time. We have -- we have tornadoes. They`re very, very serious,
and, of course, we take care of the problems when they come up, we do get
some federal help, but nonetheless, we analyze what the damages are and
what was caused by the particular disaster and not just use that to open
the door and have something in there for everybody. That`s just what is
happening now. $16 billion, and there`s something for everyone in there.

(END VIDEO CLIP)

KORNACKI: I mean, he`s actually - I mean he`s prescient, in a way, you
know, he`s acknowledging this is what his state faces. But he`s saying,
oh, you know, we`re not going to -- you know, this bill is full of waste,
but then this is what he had to say after the disaster did hit his state.

(BEGIN VIDEO CLIP)

INHOFE: That was totally different. They were getting things -- for
instance, that was supposed to be in New Jersey, they had things in the
Virgin Islands, they were fixing roads there, they are putting roofs on
houses in Washington, D.C Everybody was getting in and extorting the
tragedy that took place. That won`t happen in Oklahoma.

(END VIDEO CLIP)

KORNACKI: I love how he (inaudible) U.S. Virgin Islands from Britain
Islands.

(CROSSTALK)

KIM: I think it sounded like a foreign aid bill. You know, like, you know
to the -- look, Hurricane Sandy did impact the Smithsonian, the roof was
damaged. There are -- there are fund`s efforts to clean up the shoreline
in Alaska, which was hurricane -- which was the tsunami damage from Japan.
So, yes, there are things in there that built that are not directly Sandy
related? That`s different from saying that they`re waste or unnecessary.

KORNACKI: Well, it`s also -- and just sort of the assumption because we
all -- the Tea Party kind of feeds in -- I think there is this sort of knee
jerk assumption that most Americans have, that the government is big, it`s
big, but it`s bloated and it`s just full of waste everywhere. And there is
an assumption that this is where the waste is, and this is why your taxes
are high. This is where, you know, your money is being squandered because,
you know, there is an extra billion dollars in this package. And this is
not where the cost of government is. This is not what makes tax rates, you
know, over 30 percent for some people. It`s not because of, you know,
appropriating a couple of billion dollars for disaster relief. And we`re
talking about -- we`re talking about the Defense Department or something.
That`s where -- that`s where big money is.

SMIKLE: You know, that`s absolutely right. I mean this is -- this goes to
sort of the fundamental question about what do you think government does?
And you`re absolutely right. This is not what costs money. I mean, this -
- when people get into situations, and I was with Senator Clinton -- then
Senator Clinton during 9/11. This goes back to a fundamental understanding
or assumption of what you want your government to do at times when you most
need them.

KIM: I just want to jump in here, because part of the problem here is that
there is a sort of toxic legacy of FEMA from the Bush administration,
right? We know that FEMA gave no-bid contracts to Republican companies,
companies that would (inaudible) like Halliburton. Carnival cruise lines
got a $238 million, no-bid contract to house Hurricane Katrina evacuees.
So, that sort of crony capitalism set the stage for these austerity cuts,
and you have to kind of give -- I`m going to say one nice thing about
Senator Coburn, he has been sort of consistent ...

KORNACKI: Yes.

KIM: Right, in his monitoring ...

KORNACKI: Yes.

KIM: Along with Barack Obama, who was a senator and was one of the first
who has to point out the Carnival cruise lines contract under, you know, my
pack ...

UNIDENTIFIED MALE: Well, and yeah ...

KORNACKI: And Coburn, you know, going all the way back to he`s a member of
Congress when the Oklahoma City bombing happened in 1995, and he was
articulating the same position back then.

MARIN COGAN, GQ.COM: This allegation is one of the most conservative in
the entire country between Senators Coburn, Inhofe, and then you have the
House delegation as well. So, these are very deeply (inaudible) are on
their apart, and the honors and impetus is going to be on them if they
believe that there needs to be offsets, cuts and spending elsewhere to come
up with those cuts, pass them immediately and get everyone to agree to
them. So, the funding is there for this time, but it`s not going to be
there for them all the time.

KORNACKI: And it was -- it`s interesting, Coburn was on this network, on
"Morning Joe" this week, and this is very interesting the way he kind of
just explained this. I want to play what he said and talk about it.

(BEGIN VIDEO CLIP)

TOM COBURN: We`ve got too much government now. What you`ve already seen
in Oklahoma is a complete voluntary response. Almost $50 million have been
raised and given for the cause down there. You`ve seen tremendous neighbor
to neighbor response where less than 25 people had to spend the night in
the shelter, of everybody that was displaced because neighbors are helping
neighbors.

You watch how we handle this. We`ll clean it up, we`ll go on, we`ll get by
and we`ll rebuild. And what we`ll say is, if you want to help us, fine, if
you don`t, we`ll take care of it ourselves.

(END VIDEO CLIP)

KORNACKI: And that`s just that basic "We`ll take care of it ourselves." I
think that really is sort of -- the Tea Party attitude towards government,
I think of like back in the stimulus, you know, when that was going on in
2009, you had Republican governors rejecting federal money, that`s a very,
you know, that -- Coburn has been consistent. This has been his position
his entire political career, but I think what`s different over the last --
he came to office almost, you know, 20 years ago. What`s different is this
is now basically, this is very prevalent within the major political party.
This is the position of e conservative movement. This is what the
Republican Party is saying, and it`s affecting not just disaster relief,
it`s affecting the entire government.

FRANKE-RUTA: Although, I do think with the case of Oklahoma, I mean there
is this sort of specific thing going on there with tornadoes, especially,
which -- it does allow for neighbors to help neighbors because they`re
discreet, they have a path on and then they end, they don`t cover the
entire city like a hurricane does. And, you know, Oklahoma is number one
in federally declared disasters. We`re going to be dealing with Oklahoma
disasters again sometime soon, I`m sure, given their history, and it`s just
a matter of imaginative capacity to think about disasters that strike
differently than tornadoes, which do have these sort of violent, but
discreet pathways.

KORNACKI: And I want to talk here in a second or two about just this issue
of offsets that Coburn raises now when it comes upon a timing. When you
talk about offsets, where that money is coming from? I want to talk about
that after this.

(COMMERCIAL BREAK)

KORNACKI: So I mentioned the idea of offsets, and this is, you know, Tom
Coburn always calls for this when there`s a disaster. Again, consistent,
he does it when it`s in his home state. And basically, hey, if we`re going
to give money in disaster relief, we`re going to take money from somewhere
else in the budget, so we`re not, you know, spending anything new. But I
think it`s worth pausing for a second and asking, when he says that, where
in the budget is this offset money coming from? It`s coming from a very
specific place. It`s coming from non-defense discretionary spending. This
is not coming from the military, it`s not coming from entitlement programs,
you know, like Social Security, Medicare or anything like that, it always
comes from non-defense discretionary, and I think it`s part of a pattern
here where Republicans -- and they don`t have the White House, they haven`t
control of the Senate, but they have managed over the last few years to
really chip away at these programs like Meals on Wheels, Headstart. This
is non-defense discretionary. Every time there`s some kind of a budget
deadline, you have this -- we continue resolutions in 2011, yet a budget
control like -- with the debt ceiling, you had the sequester now. All of
this eats away at that portion of the budget, and when somebody like Tom
Coburn says offsets, that`s what he`s talking about.

SMIKLE: Right. And remember, even going to back to the election, a
Romney-Ryan plan had them cutting FEMA at almost 40 percent. There, it is,
it is in a sense, demonizing people that actually need this kind of help
and need this kind of aid. And then going back to sort of 9/11, one of the
things that always struck me is when a lot of members of the House and the
Senate would come into New York to sort of take a look at the damage, they
just didn`t understand how people lived. They went down the Battery Park
and said, oh, those are office buildings, right? Actually, no, those are
apartment buildings. People live there. So, they have real no -- no real
idea of actually how people live, so when you`re making these judgments in
one state and then trying to sort of project forward and say, well, I`ve
never been in New York, I don`t know how they live, but this is what I
think they need, I think that`s fundamentally wrong, but this is something
you see all the time.

KORNACKI: And it`s just, you know, when you look at it, it`s also -- it
just sort of raises the question, there is there -- the Republican Party,
there is a divide in the Republican Party where there are Republicans, you
know, who represent states where the attitude towards government is a
little different. But there are also Republicans like in Oklahoma who have
different attitude about this, and I want to play sound from one of them
here. This is Tom Cole, congressman. Again, his hometown is Moore and
this is what Tom Cole had to say about Tom Coburn`s offset idea.

(BEGIN VIDEO CLIP)

REP. TOM COLE (R-OKLAHOMA): I don`t want to spent a lot of time in funding
fights here. I voted for Hurricane Sandy relief and there`s always better
ways, maybe, to do things. But once a disaster happened, particularly the
people on the ground need to know they`re going to get help. And if we can
do that in a prudent way, then I want to do that. But at the end of the
day, my objective is to make sure the people here get the help they need in
a timely fashion.

(END VIDEO CLIP)

KORNACKI: That`s just (inaudible) to me, because Tome Cole`s background
is, you know, he ran the Republican Congressional Campaign Committee for a
few years. He`s somebody who kind of -- is maybe a little bit more aware
and maybe a little bit more sensitive to and attuned to, you know,
attitudes outside of the Tea Party base of the Republican Party. You know,
again, it`s also his hometown, but this is -- he also voted for Sandy aid.
So before it affected his hometown, he also had this position. It`s
striking that it`s him who was raising that point.

COGAN: It`s interesting to hear him sort of, when he was saying, I voted
for Sandy relief aid, you know, he`s sort of pleading empathy. He`s a
little bit different, I think, in this delegation because he`s been there
for a lot longer. And I think he`s -- I think he`s very conservative, but
he I think is also a pragmatist. And it was something interesting that you
mentioned earlier about Republicans sort of chipping away at the spending.
And I think a lot of it is because House Republicans are really frustrated.
They don`t have the Senate, they don`t have the White House. A lot of
these Tea Party guys are new and they are very frustrated that they haven`t
been able to get anything done, so you see them like attacking these small
things and really holding ....

KIM: And in this particular case, with the funding for the (inaudible)
it`s all a good point. I mean there are actually -- there`s not a need for
something like that bill. There are no offsets that are going to happen.
So, it`s a messaging strategy beyond an actually budgetary one. I mean
they are really laying down that their consistent on this, and that is
playing to the Tea Party base for the primaries. I mean this is all
rhetoric here, not actually substance.

KORNACKI: Right, right. And again, it`s interesting, too, that it`s
Oklahoma because I sort of think of a couple states could qualify. Because
Oklahoma is sort of the capital of the Tea Party line. But this is
probably the most conservative state in the country and this is a message
that still has -- still has resonance. That basic, you know, we don`t need
the government attitude that Tom Coburn, you know, was expressing, has real
resonance in the state.

FRANKE-RUTA: Oh, that`s reflection of the sort of structural issue in the
Republican Party right now, which is that they are not a national party
right now. They`re a party that represents very deeply culturally
homogeneous districts and they represent the people who live where they
live, and they don`t want to represent the nation as a whole and think
about how to govern an entire nation, a diverse, populous, differently
constructed.

SMIKLE: Oh, I think it`s interesting you talk about the frustration, I
mean when you have a guy and Governor Christie who spoke at your convention
and then you get upset at him because he hugs the president when he comes
to visit your state, I mean that just -- it epitomizes it, in my opinion.

KORNACKI: Well, you just tease what I want to get next ...

SMIKLE: Sorry.

KORNACKI: Because ....

SMIKLE: No, no, no.

KORNACKI: I`m begging you. That`s great, because, you know, we can talk
about Coburn, we can talk about Inhofe, but we can also talk about a
Republican with a dramatically different attitude on this whose state has
benefits from and who politically himself has reaped (inaudible) benefits.
You know who I`m talking about. We`ll get to that next.

(COMMERCIAL BREAK)

KORNACKI: It`s Memorial Day weekend, which, you know, is sort of the
traditional start of the summer season. In New Jersey, the traditional
start of the summer season on the shore, and, of course, the context for
all of that this year is, you know, this was -- this is the first summer
season after Sandy. And Governor Chris Christie was there, you know late
last week. That is giant ribbon cutting on like five miles to officially,
you know, open it. Not everything is back to normal, but they are getting
-- there is a significant progress because of the federal aid that Christie
was sort of instrumental in bringing about. I just want to revisit that
for a minute. Because again, this was Chris Christie when Republicans like
Tom Coburn were holding up Sandy aid, this was Chris Christie earlier this
year.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R ) NEW JERSEY: There is only one group to blame for
the continued suffering of these innocent victims. The House majority and
their speaker, John Boehner. This is not a Republican or a Democratic
issue. National disasters happen in red states and blue states, in states
with Democratic governors and Republican governors. We respond to innocent
victims of natural disasters not as Republicans or Democrats, but as
Americans. Or, at least, we did until last night.

(END VIDEO CLIP)

KORNACKI: Sandy aid -- Sandy aid package obviously eventually did get
through, but, you know, the problem is, it`s something that should not be -
- we should not respond to as Democrats and Republicans. The risk here is
that this is becoming something that we respond to as Republicans and
Democrats and Christie obviously represents the most common, most vocal
force within the Republican Party who is trying to keep this from becoming
the next litmus test issue in the Republican Party that you say, offsets
every time there`s a disaster. He`s got -- he`s ripped enormous political
benefits for this in New Jersey. I`m not sure in the national Republican
Party he has.

COGAN: It`s interesting how the tone changes, though, between
congressional Republicans and Republicans who have to sort of govern the
whole state or govern at a national level, and I think that really gets
stick around to this point about House Republicans sort of representing
this culturally homogenous and often gerrymander districts, so they are
sort of able to operate in a very different world than Republicans who have
to sort of govern on a state or national scale.

SMIKLE: Right. And I think the regionalization of the party is -- in
fact, there`s in as well, because you`ve got this sort of erosion of the
northeastern Republican and sort of Rockefeller Republican, which I think -
- we can debate whether or not Christie represents that, but the erosion of
that I definitely think plays into the regionalizaion.

KIM: Well, you know where that rubber sort of hits the road with that,
(inaudible) is with the Medicaid expansion and the health care exchanges.
You have governors who are in charge of their states and those states would
benefit from that implementing these exchanges and having Medicaid
expansion. They`re just refusing too. So it will be interesting to see if
they could stay in power as executives in those states.

KORNACKI: You know, we`ve talked about that a lot, how the sort of red
state/blue state divide that we see in 2000, and is working on every
election night, is now really rearing its head when it just wants to come
to public policy. And then with the gay marriage when we talked about it,
when we talked about the Medicaid expansion, it`s another one, and it`s
almost, you know, is disaster aid, you know, the governor of blue state New
Jersey, the Republican Governor of blue state New Jersey will welcome
disaster aid. Again, it became an academic issue a bit in Oklahoma this
week because they`re going to have money from FEMA, but, you know, who
knows if they hadn`t. And Christie was asked this week -- I think he was
at one of these beach openings this week, but he was basically asked about
the idea, of, you know, hey, look, some of these guys in Oklahoma tried to
hold up funding for you, what do you think of giving funding to them? This
is what he said.

(BEGIN VIDEO CLIP)

CHRISTIE: Two wrongs don`t make a right, Angie, and I would urge all of
the members of the congressional delegation in New Jersey to support swift
and immediate aid in whatever amount is deemed necessary for the people of
Oklahoma. This is not a time for political retribution. What this is, is
to bring our country together.

(ENDVIDEO CLIP)

KORNACKI: And he was also asked about, you know, President Obama. That he
praised President Obama a week before the election for his response to
Sandy, and he was asked if he regretted that, and he was asked about, you
know, the White House, how the White House and the administration have sort
of followed up on the promise to help on Sandy. He said, I have no
complaints of that, no regrets about the previous election. And again, I
mean I look at what`s happening on the Jersey shore this weekend and it`s
mostly good news. That there are lots of issues with the cleanup, but it`s
mostly good news. And I also look at Chris Christie and say, that`s going
to help him in 2013, in his election this year. And popularity -- I feel
(ph)is almost dropping every time something like this happens, though, in
the Republican Party nationally.

SMIKLE: Yeah, it`s actually -- it`s pretty shocking to me, actually,
because they just will not embrace their own. And -- and you`re right.
This is a reelection, you frame there is some controversy because he`s
appearing in some tourists ad, but this can -- this really can only help.

KORNACKI: Yeah, that`s right. He is -- there is this $25 million ad
campaign, you know, come to the Jersey shore, it sort of stars Chris
Christie and that is -- well, if these ads are going to be on during the
reelection year, that`s a problem and he said it would be -- it would be
weird if I wasn`t in that ....

(LAUGHTER)

KORNACKI: Took away stapes (ph) of money and some (inaudible) aggregate, I
guess.

FRANKE-RUTA: Northeastern Republicans have a pretty good track record of
being out there and standing up and being national figures who are very
much appreciative for what they are saying right after national security or
natural disasters, but it`ll be interesting to see whether or not that kind
of popularity carries over if he runs for president. You know, it`s what
he will be confronting, a base of voters that is much more like the one
that is in some of the (inaudible) districts.

KORNACKI: Yeah, I know, I guessed that sort of the issues -- either Chris
Christie of 2012 and 2013 who is thinking about, I have to run in New
Jersey in 2013 ...

FRANKE-RUTA: He gets reelected. Does he then become a new Chris Christie?
We`ve seen that happen to politicians many times, in fact, an unlikely
conservative vote for immigration reform and the forces behind it, that`s
next.

(COMMERCIAL BREAK)

KORNACKI: Orrin G. Hatch, the 79-year old Utah Republican who was sworn
into the Senate when the "$6 Million Men" and "Happy Days" were the top two
shows in America, voted for comprehensive immigration reform this week.
All sort of, he voted on Tuesday to move the bill out of the Senate
Judiciary committee. It will still be a while before it reaches the actual
Senate floor. Still, though, it is a big deal that he did it. A really
big deal. And it`s also depressing. I`ll try to explain why.

First, the one way of looking at it. Two other Republicans on the
committee, Lindsey Graham and Jeff Lake voted for the bill, too. But they
were part of the Gang of 8, that`s the bipartisan group of senators who
negotiated the bill before it went to the committee. Hatch is the
surprise. He is a conservative Republican, he wasn`t part of the Gang of
8, no one knew what he was going to do. And he voted yes. That yes vote
is a big deal because it really made the committee`s vote look lopsided and
bipartisan. The 13-5 was the final tally. And that suggested that more
conservatives like Hatch will end up supporting it when the full Senate
votes on it, so that the full Senate vote will also look very bipartisan
and lopsided.

Which is critically important and here`s why. The way Washington works,
and works is a relative term in this day and age, but the way Washington
works right now, the only way to get big legislation enacted is to rack up
a big bipartisan majority in the Senate. Not just to get the 60 votes you
need to break a filibuster, but to get more than that. When that happens,
it isolates the House and it turns up the heat on Speaker John Boehner and
his Republican conference. Here`s this big, important piece of
legislation, with deep, broad, bipartisan support. Are you really going to
let it die? This is how Sandy aid, this is how the Violence Against Women
Act, this is how the debt ceiling deal, this is how they all got through
this year. Boehner and the GOP caving to pressure and allowing the House
to vote on what the Senate had passed. And that is roughly how immigration
will get through if it gets through. So that`s why it was such a
breakthrough to have Orrin Hatch cast that vote on the judiciary committee
this week.

And now let me play Debbie Downer. Because when you look at what it
actually took for Orrin Hatch to cast that vote on Tuesday, what it took
for a Republican Senator from a red state to feel politically safe
supporting immigration reform in a committee vote, then the story end up
explaining why almost nothing important happens in Washington anymore and
why that`s probably not going to change any time soon even if immigration
reform does get through.

Let`s wind the clock back three years, to May of 2010. It was the Utah
State Republican convention, and it is where Hatch watched as the political
career of Utah`s other Republican senator evaporated on the spot. That was
Bob Bennett. He had been in office for three terms. He was very
conservative. But the Tea Party was rising and Bennett had voted for TARP
and worked on a health care bill with the Democrats. The convention was
filled with conservative activists, GOP nomination was on the line, the
vote was taken. Bennett got 26 percent. And that was it. His career was
over right there. And Orrin Hatch was a witness to all of it. And he knew
right away that he would be the Tea Party`s next victim unless he changed
his ways, and unless he did it quickly and dramatically. Hatch has always
been a conservative, won a seat in 1976 running as a Reagan Republican
against the old Nixon/Ford regime, but he was also interested in governing
which meant compromising occasionally, working with Democrats, sometimes
speaking his mind. Before there was a Tea Party, Orrin Hatch put his name
on a bill with Ted Kennedy, who by the way was his close friend, to create
the children`s health insurance program. He signed on to a healthcare plan
with an individual mandate. He proposed an early version of the Dream Act.
He even tangled with Jesse Helms when the Ryan White AIDS Act reached the
Senate floor.

(BEGIN VIDEO CLIP)

SEN. JESSSE HELMS, (R ) NORTH CAROLINA: I`ve never heard once in this
chamber anybody say to the homosexuals, stop what you`re doing. Do you
realize that if they would stop what they`re doing, there would not be one
additional case of AIDS in the United States of America.

SEN. ORRIN HATCH, (R ) UTAH: But Senator, I don`t agree with that. There
wouldn`t be among homosexuals, but there certainly would be other cases
because of the prevalence of the disease right now.

HELMS: Well, ask ..

HATCH: I don`t agree with him that if all homosexuals quit having
homosexual contact that that would end the AIDS crisis. I don`t think it
would.

(END VIDEO CLIP)

KORNACKI: That`s the Orrin Hatch the world knew until the Tea Party
emerged and went to war with the Republican establishment And until the
Tea Party started winning, something that scared Hatch. He was up for
reelection in 2012, he wanted to keep his job. So he changed. He went
full Tea Party. Orrin Hatch, a guy who once had been OK with an individual
mandate took to calling the Affordable Care Act "A dumb ass program, an
awful piece of crap, and an unconstitutional monstrosity. The Dream Act,
the Dream Act he once co-sponsored, he came up for a vote in 2010, Orrin
Hatch called it "a cynical exercise in political charades when CPAC, the
annual convention of conservative activists met in D.C Hatch declared that
his new mission was to become "the most hated man in this godforsaken city
to save this country."

This is what Orrin Hatch had to do to save himself in 2012, to survive the
Utah Republican Convention, to keep from becoming the next Bob Bennett. It
meant shutting down every and any instinct he had to compromise, to
legislate, to do the real work of a United States senator. And it worked.
Hatch survived 2012. He won six more years in the Senate. And that gave
him just enough space, just enough political cover to vote for the
immigration reform bill this week. In committee. After attaching an
amendment with no guarantee he`ll vote for it on the floor, on what`s
probably the only issue where there are serious Republican voices urging
Republican legislators to compromise with Democrats. This is what a
bipartisan breakthrough looks like in the Tea Party era. It took three
years of wild, over the top abstractionism for Orrin Hatch to feel safe
taking this one tentative step and he`s not alone. Capital Hill is filled
with Orrin Hatches these days, just why I`m not exactly holding my breath
waiting for the next big breakthrough.

I want to talk about the high price of compromise on the Democratic side,
that`s after this.

(COMMERCIAL BREAK)

KORNACKI: As we were just saying, with Orrin Hatch`s support, the Gang of
8`s immigration reform package cleared the Senate Judiciary Committee on
Tuesday on a bipartisan 13 to 5 vote. The bill to the full Senate next
month, but in reaching that bipartisan majority, a big compromise was
forced, one that pitted two important Democratic constituencies against
each other, (inaudible) in the LGBT community. It all happened after
Senator Patrick Leahy of Vermont, chairman of the committee, introduced an
amendment to include same sex couples in the law to add protections which
treat them as equals with straight couples.

(BEGIN VIDEO CLIP)

SEN. PATRICK LEAHY, (D) VERMONT: I don`t want to be the senator who asks
Americans to choose between the love of their life and the love of their
country. Discriminate against a segment of Americans for who they love is
a travesty, it`s ripping many American families apart.

(END VIDEO CLIP)

KORNACKI: Republican Senator Lindsey Graham immediately warned that the
amendment would shatter the Gang of 8`s already fragile coalition, that
sentiment was then reiterated by Democrats Dianne Feinstein and Chuck
Schumer.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN, (D) CALIFORNIA: We now know that this is going to
blow the agreement apart. And I don`t want to blow this bill apart.

SEN. CHUCK SCHUMER (D) NEW YORK: They`ve made it perfectly clear, in plain
words and on multiple occasions, that if this provision is added to the
bill, they will have no choice, as Senator Graham said, to abandon our
collective effort and a once in a generation effort to pass comprehensive
immigration reform will be finished.

(END VIDEO CLIP)

KORNACKI: And so, Senator Leahy, recognizing that the amendment would not
succeed and having forced his Democratic colleagues to explain their
opposition in public, withdrew his amendment. Immigration reform, an
important promise to Latino voters was still on track for passage. With us
at the table now is Marin Cogan of "The New Republic, and joining us, we
have Chris Geidner, senior political and legal reporter at BuzzFeed.com,
along with Richard Kim of "The Nation" and Garance Franke-Ruta of "The
Atlantic."

So, This is just -- this is the definition, I think, for Democrats in the
Senate, on this committee of just a wrenching compromise. Just from a very
basic sort of, you know, political coalition perspective, you have two key
cogs sort of within the Democratic coalition that were basically pitted
against each other this week, and you are almost forced to choose between
them. And, you know, you see, you know, Schumer and Feinstein sort of
urging, you know, urging Democrats to say no, we`ve got to be pragmatic
about this and we can`t satisfy both. Let`s make sure we satisfy at least
one. And that was the decision that Democrats made this week.

KIM: But I actually -- you know, I think what the Leahy and the fate of
that showed, is it gave the law to the idea that this whole thing isn`t
bipartisan at all. Right? The numbers are bipartisan, but if you actually
look at the sausage making on this, it`s happening inside the Republican
Party, right? So the Leahy moment -- if he went straight up for a vote in
the Senate, it would get 54, 55 supporters, clear by a healthy majority,
but it won`t get a vote in the Senate. It didn`t even get a vote out of
committee in the chamber that the Democrats control, right? And that sort
of really shows how Democrats are kind of ornamental on this process. The
sort of left flank of immigration debate, I think is defined by the gang of
Republican numbers of the Gang of 8, reveal Flake. You have in the center
Orrin Hatch, people like Pat Toomey that they`re trying to convince, and
then Cruz, Senators Cruz and Grassley on the right. And that`s really
where the arguments are happening, and it`s sort of a shame that because of
the filibuster, you have the majority of people in the Senate are sort of
on silence of this whole process.

KORNACKI: And it is -- yeah, it is the filibuster`s party, as obviously,
because now in the Senate, basically 60 is the rule for everything. If you
don`t have 60, you`re not going to get anything done. But it`s also the
second component is the House, right? Where it`s like the new sort of
formula in the dysfunctional Washington for passing anything ....

KIM: 70

KORNACKI: Right. A huge number in the Senate so the House has no choice,
because you get 60 in the Senate and it`s, you know, five Republicans
joining the House and saying, oh, that`s the rhino Republicans did that.
I`m not going to join that. This is still far (ph). So you`re trying to
put so much pressure on the House that they have to give, but you`re right,
yes, the discussion is the Republicans get to set the terms as long as they
control the House and as long as 60 votes is the rule in the Senate.

CHRIS GEIDNER, BUZZFEED.COM: That was -- I mean that was the problem with
the way that things went down with these compromises, you say, in the
Senate, is that there was no compromise. Like this was a side issue from
the start, and when I was talking with Rachel Tiven, the head of
Immigration Equality, after the Senate`s Judiciary Committee this week,
what she said it was that she wasn`t so upset with Chuck Schumer and
Senator Feinstein this week as she was that he didn`t make a harder press
for LGBT inclusion back when they were crafting the bill.

KORNACKI: Well, there was -- and others, I mean I put this statement up,
this is the DOMA project on Schumer and Feinstein, and what you saw in the
intro there. This is the DOMA project statement. "This was the moment
that required courage and leadership. The most vulnerable members of our
community relied on Senator Schumer and Senator Feinstein to stand up for
us and end decades of catastrophic and irreparable harm to our families
caused by DOMA and our exclusion from U.S immigration law. But I mean --
either think about the sort of logic behind what Schumer and Feinstein did.
If it was part of -- they were pushing for this from the beginning, is
there any feasible way that somebody like Marco Rubio would be involved in
this? I guess that`s sort of the question they face.

GEIDNER: Well, I mean that statement came from Levis Holloway (ph) who`s
been working on these issues from the get go, who helped craft the language
for the United American Families Act, and what they saw this week was that
this issue that had been for the -- since Democrats began talking about
comprehensive immigration reform several years ago. Same sex couples were
a part of that discussion. And then all of a sudden this week, on Tuesday,
they were told, well, no. Not really. And I think that that where that
left a lot of Democrats feeling was exactly what Richard described, which
was that this isn`t the bipartisan comprehensive bill that Democrats had
been fighting for all along.

KORNACKI: Which is -- which is the dilemma, you know, immigration reform
is the big thing that might actually get through, but it`s the dilemma for
anything, right, you are a Democrat, you have to get right now Republican
support if you`re going to get anything through the Senate and you`re going
to have to marginalize the House to get on the floor of the House, so, you
know, I look at it and I see, obviously, the merits of it, and I also say,
if you`re going to get that 70 votes in the Senate, if you`re going to get
20 Republicans voting for it, is there any feasible way right now that you
can include an LGBT provision and get to that number?

FRANKE-RUTA: I mean it could still come back as Senate floor amendment, at
which point, you know, it would probably be more politically useful for
Democrats rather than having -- proposed as a vote within the committee in
such a way that it would delay the exit from the committee of the bill. A
4 vote would, you know, put Republicans on record with an anti-gay vote,
you know, probably just weeks in advance of the Supreme Court decisions.
It still wouldn`t get it into the bill, but it would be more politically
useful for Democrats as a failure.

KORNACKI: Right.

GEIDNER: The question is, what happens in that vote? I mean, does that --
if it fails, that means that is Chuck Schumer going to vote against that
provision in order to satisfy the other members of the Gang of 8, or is it
going to be a situation where because it`s not going to get above the 60
votes, the Gang of 8 is OK with them voting that way?

KIM: And I think that`s the idea, that it`s just -- it`s a symbolic
measure to put on record the homophobia of most of the Republican Party
minus Susan Collins who supports this.

FRANKE-RUTA: But you understand that ...

KORNACKI: That 60 vote thing now also tends to apply to these amendment --
to these amendments. It`s not a straight-up vote in the amendment. It
becomes -- if you have 60 votes to the amendment or not, so I guess if they
had the amendment, it would almost be for show. That`s -- that`s the
dynamic we talk about of the Republicans. Susan Collins commission comes
from a blue state, Mark Kmelnoy(ph) comes from a blue state. But by and
large we have Republicans who are trying to satisfy Republican audiences
and Republican constituencies. And so, you -- at this point is there a
political incentive for them to do that. But you mentioned the Supreme
Court ruling is coming down, and I think that affects it. I want to talk
about that after this.

(COMMERCIAL BREAK)

KORNACKI: A grant`s mission that, you know, we have, the Supreme Court
ruling potentially coming up -- coming up in a few weeks and potentially
getting rid of DOMA, and, you know, Chris, I know you wrote about this week
there are some sorts of complicated legal questions here, but the
possibility is this entire debate over whether LGBT families should be
included in the immigration reform bill, could be moot if DOMA is thrown
out.

GEIDNER: If section 3 of DOMA, which prohibits the federal government from
recognizing same-sex marriages is struck down by the Supreme Court this
June, then the provision that currently same-sex couples can`t get green
cards with their spouses because of DOMA becomes applicable to them and at
that point the entire idea of needing a separate law for same-sex couples
does become moot. In some ways there are people who are going to be living
in states where they can`t get married, maybe they can`t afford to travel
to a state to get married that still would face difficulties. But the
underlying basis for why the offer of the Uniting American Families Act or
this secondary amendment that Chairman Leahy introduced, that would
recognize marriages specifically becomes taken care of.

KORNACKI: So if they were governing -- just before, without any act of
Congress, the government would be forced to recognize same-sex couples if
DOMA is thrown out. And by national same-sex couples.

GEIDNER: I`m sure the Obama administration would say, would be allowed to.

KORNACKI: Right. OK. Right. It`s a question of ...

(LAUGHTER)

KORNACKI: But then, but ..

GEIDNER: All of a sudden, now same-sex couples -- currently if a same-sex
couple applies for a green card based on their spouse, they`re denied. Or
actually, now they`re pretty much put into abeyance because the Obama
administration is probably hoping that they`ll be able to grant those green
cards.

KORNACKI: Because that said, and does that change administration to
administration? Is that become- you know, if Republican President Rand
Paul comes in in 2016, can his administration start reversing that?

GEIDNER: Well, it`s the attempt, if DOMA section 3 is struck down, and a
future administration attempted to stop granting green cards to same-sex
couples, then couples would have a lawsuit on their hands.

KORNACKI: OK, so then it would be tied up in court. Yeah, I know, I --
it`s the dilemma, like I said, just for the senators this week is so
fascinating, and it might be that Democrats were a little more willing to
not pick the fight on this one because of the pending DOMA decision. But
another thing I wanted to just say, this was Gabriel Arana in "The American
Prospect" and again, he was talking about, you know, do you vote against
this -- do you vote against this bill now if you believe in -- if you
believe in LGBT equality, and he invoked the example of Russ Feingold who
would -- voted against Dodd-Frank just on principle in 2010, and he said,
this is bad decision, because ironically, Feingold (inaudible) to only
serve a further week in the legislation in order to break a filibuster,
sponsors had to appease Scott Brown, Massachusetts Republican. And Brown`s
price was, you know, he didn`t want a bank tax in the bill, so you didn`t
get -- something that Russ Feingold would have supported, a bank tax that
would have brought up about $20 billion was not in there, because he wasn`t
(inaudible) to be part of this decision because he was standing on
principle. And just -- that just seems like this is -- that`s one of the -
- that`s something that people and senators in the situation -- this is --
this is the kind of decision you have to make. This is what legislating
really looks like, these kinds of compromises.

FRANKE-RUTA: Yeah and if you just say no to everything that`s not perfect,
you`re Ted Cruz, basically, and I think the Democrats don`t want to go down
that route. You know, at a certain point, you have to govern. And there
is an opportunity before them to arrive at something that will take 11
million people into a different legal status and really change their lives,
and there`s a greater opportunity to do it now than there has been in 25
years. And if the Democrats don`t take that -- we don`t even know how
this is going to get through the house, right? I mean -- or if it will,
and so, if the Democrats don`t take the opportunity to keep this thing
going, especially given the upcoming Supreme Court decision, that`s 11
million people who are left hanging. And I just -- I don`t think they can
do that in good conscience.

KIM: And you know, I know Gabriel got a lot of flack for suggesting that
they should sort of take one for the team, and a lot of gay activists have
been very angry with Senator Schumer and Feinstein this week. I think
someone that`s lost in that, is that, you know, the people affected are
also gay and immigrants, right? And that all of the -- all of these people
in these binational couples, they also have other pathway to citizenship,
if immigration reform bill passes. They have the same pathway to
citizenship that -- that straight immigrants do, just not the marriage one.
So, you know, they have also a best of interest in getting this bill
passed, any kind of immigration bill passed with the pathway to
citizenship.

KORNACKI: Yes. With now -- I mean we were talking on the show yesterday
about like FDR and the new deal and I mean all of the sort of the wrenching
compromises that he had to make, and, you know, you can talk about the
advancements that African-Americans made because of the new deal, and it
was true, and FDR was looking to do that. But FDR also, you know, drew
some lines that in history don`t look good, but at the time, you know,
anti-lynching laws came up in 1938. FDR wouldn`t gush (ph) for it,
wouldn`t put his name on it, because he said, then that will cost me the
south on every vote I need to save the country`s economy. And he wouldn`t
-- and so he made that kind of -- it`s the brutal compromise that, you
know, may have been necessary at the time.

GEIDNER: Well, I don`t think that -- I mean I think it is important to
note that none of the LGBT advocacy groups have said that if same-sex
couples aren`t included, this bill should go down.

KORNACKI: Right.

GEIDNER: They have supported the legislation, they`ve said -- and it`s put
them in a difficult -- I mean, I think that they`ve been put in the
difficult position that you described the Democrats being in, because they
don`t want to be seen as torpedoing this bill.

KORNACKI: All right. We`re going to keep this going right after this.

(COMMERCIAL BREAK)

KORNACKI: Hello from New York. I`m Steve Kornacki here with Marin Cogan
of "The New Republic" magazine, Chris Geidner or BuzzFeed.com, Richard Kim
of "The Nation" magazine and Garance Franke-Ruta of "The Atlantic"
magazine.

You know, so, we`re talking about the choice that Democrats in the Senate
Judiciary Committee faced this week, a very tough choice where Patrick
Leahy, the top Democrat in the committee offered an amendment to the
immigration reform bill. It would grant the same rights to the same sex
couples that straight couples have. In what you saw it was -- what kind
of, what was fascinating to me, was the choreography here, it seemed of the
Democrats, you know. Chuck Schumer, who is at the heart of the -- of
crafting this Gang of 8 compromise kind of led the way. Diane Feinstein
joined him. We didn`t mention in the last segment Al Franken also chimed
in where they were -- they were all sort of making the pragmatic case for
hey, why, if you support immigration reform, you want to have this, you
can`t have it because you can`t have immigration reform without that.

In watching this sort of choreography, it`s striking to me how that
coalition, that gang of a coalition on both sides has really, you know,
stuck together. So you`ve had Republicans who are trying to peel off Marco
Rubio and trying to offer, you know, ways to get him away from it and he`s
fought them off, and here you had Democrats basically doing the same to
their base.

GEIDNER: Yeah, I mean I think that it was watching the -- I mean, there
were points at which Senator Graham was saying, Senator Flake was saying,
look, we`ve taken it from our side on some of our amendments and we`ve
stuck with you, which I think was sort of a key note that, like, as these
votes come up tonight, you better stay with us as well. And they did,
actually, the Senate did vote on an amendment by Senator Hirono that would
have dealt with family reunification, and the Judiciary Committee voted on
it, and that was a situation where those same people where Senator Durbin
and Senator Schumer said, we need to protect the Gang of 8 and voted
against it.

COGAN: The cohesion among the Gang of 8 is really something to watch, I
think especially for the people who were there for the 2007 immigration
fight really recognize the importance of sticking together, of course, they
are planning to have daily meetings as the bill goes to the floor. And
stick together on things. And I think they recognize. You know, when
Lindsey Graham says he`ll walk, you know, listen. If Marco Rubio says
he`ll walk, listen. The people who went through this fight in 2007 just
don`t want to go through this again.

KORNACKI: Yeah, I mean it is amazing. We had the last, you know,
comprehensive immigration reform almost 30 years ago, you know, in 1986,
and this is an issue that has really been on the agenda now in Washington
somewhere for a decade, and really, if it doesn`t happen now, it`s not
going to happen.

KIM: I think also what you`re seeing, you know, because of the cohesion of
the Gang of 8 and most of Democratic Party being on board for this already,
no matter what the sort of final bill looks like, is that the Tea Party is
really making an effort here to kind of sandbag the whole process and
that`s really Grassley and Cruz. And there is an interesting kind of
Cruz/Rubio match-up, I think, looming for the presidential primary, and,
you know, one of them is going to be, you know, hoping that Rubio could be
helping to pass this and be sort of his signature piece of national
legislation, and Cruz is looking to take it down. And that is what happens
like every day in that committee.

KORNACKI: And that`s a questions. So, I mean, you know, Richard, you said
at the start of this, that, you know, like it or not, fair or unfair,
Republicans really are, sort of, at this point you have to get Republican
support to get through the Senate and you have to have the Republicans
relent and put this up for a vote in the House. The question is how do you
get there? There`s an interesting tidbit this week. Dan Balz from "The
Washington Post" was talking about Marco Rubio, how he is approaching this,
how his staff is approaching this, and -- his advisors are monitoring how
much time conservative hosts are spending talking about this. And over the
past few weeks, Limbaugh was given -- has given the issue 12 minutes, a
day, Hannity 6 minutes, 11-14, and Ingraham, 35 minutes. And -- but that`s
where we are right now, where you know, this is the agenda is set,
basically, in the conservative movement. It -- its opinion shows like
Limbaugh, like Hannity, all these folks, and it sort of trickles down from
there, and if you`re Marco Rubio, you have to be terrified that they`re
going to turn this into something like they did in 2007 where it`s just --
this is a this is a litmus test issue for Republicans. This is what he`s
fighting against right now.

COGAN: And I give Rubio -- I mean, I give him a lot of credit, but he`s
been going to conservative radio hosts, he`s been going to activists, he`s
been going to members of his own party in the senate and trying to keep
everyone on board. It is kind of remarkable that this freshman senator,
this freshman Republican is playing such an instrumental role. But, you
know, the House is going to be the real test of that, because they`re not
likely to be impressed with anyone, I think, unless he goes down there and
sort of holds everyone`s hand individually and says, this is going to be
OK, like I- it`s going to be a real test for him, I think.

FRANKE-RUTA: And for Rubio, I mean what he`s doing, it may work for him
for 2016, but he`s really doing something for the entire Republican Party.
They need this bill if they`re going to be a national party, if they`re
ever going to win the presidency again, they need this bill. And so Rubio
is out there. And people who want to, you know, think that it`s in their
interest to tank it for their 2016 interests are wrong. They`re just
wrong.

KORNACKI: It becomes one of those shortsighted - longsighted (ph) things,
right?

FRANKE-RUTA: Right.

KORNACKI: If it is a litmus test, in Republican Party, it could help your
2016 ...

FRANKE-RUTA: You know ...

KORNACKI: Greater chances in 2014. Whereas all of them are worried about
the next Republican primary right, almost more than the next general
election and the ...

KIM: I mean he`s an adult Republican, Marco Rubio, you know, who has --
who has his eyes on the prize of having a party that is viable nationally.
Senator Cruz is not an adult Republican. I mean I think that`s really
clear when you look at what is happening day by day on this bill, that he
really -- is only playing to the base on this issue.

GEIDNER: If you look -- I mean I think that that`s true and we`ve seen
that with gay rights issues, is that Rubio`s language about the reasons why
the same-sex couples amendment shouldn`t go through and couldn`t be a part
of it were almost always gauged in terms of the impact that this would have
on others. He was -- he has used very nuance language about the way that
he treats gay people that I think is notable, and we will see as especially
after June, depending on how the Supreme Court rules sort of a model for
how I think Republicans are going to be looking at gay issues moving
forward.

KORNACKI: Uh-huh. It is another interesting thing. I`ll put this up,
too, that there was a letter this week from 100 conservative economists.
And they were talking -- this was to a Republican congressional leaders,
and they were urging immigration reform. Douglas Holtz-Eakin, he was a
McCain adviser in `08. Glenn Hubbard, a George W. Bush guy. He was a
Romney adviser in 2012. Arthur Laffer, the Laffer curve, this is sort of
the holy grail of supply-side economics. And they`re all weighing in, and
it speaks to sort of - and (inaudible), it speaks to maybe that`s something
that kind of breaks -- that can break the sort of instinctive Republican
opposition to this -- conservative opposition to this. If the business
community, economists like this, with these kind of credentials are
weighing in, you know, maybe that`s something that can pressure John
Boehner to put this on the floor.

KIM: And they`re getting a lot of things for that. They`re getting
billions of dollars for border security. The border is already the most
secure border you could possibly imagine. They`re getting visas for high-
tech workers. I mean, they are getting really a lot out of the bill for
their constituencies.

KORNACKI: Yes, Orrin Hatch, we talked about Orrin Hatch earlier and what -
he signed on this week. His price was, you know, Utah is a state with sort
of this growing high-tech industry. So he, visas, the expansion of the
visa program for high-tech workers, that was - highly skilled workers, that
was sort of his price, and it got in there. That`s what I was talking
about in that long read I did. That`s legislating, right? That`s
Republicans saying, hey, this is my state, this is my constituency, this is
what I need for them, and here is how I am going to go get it. And it`s
interesting to see that happening with a guy like Orrin Hatch on a bill,
because we haven`t seen that from Orrin Hatch for the last few years, and
we haven`t seen that from just about any Republican in Congress the last
few years, because again, it`s -- the political calculation has just been
obstruction and obstruction. And I wonder, if we see on immigration now,
if there are any issues besides immigration that we can see that kind of
attitude on?

GEIDNER: I think the Republicans, the adults in the room, as you said,
Richard, see that the vote in favor of immigration reform and the voices
for immigration reform are potentially more powerful by the time we get
around to 2016 than the Tea Party will be. And they`re making that
judgment by deciding which side of this they`re coming down on.

COGAN: I think all they need to do -- all they need to say to their
conservative opponents of immigration reform is, how many national
elections do you want to lose? It`s becoming increasingly clear that this
is - that their opposition to immigration reform is going to be a huge
problem if they want to be a national party. So do you want to be a
nationally relevant party? How many elections do you want to lose?

KORNACKI: But then the flip side of that question is, do you want to lose
your next primary? In you know, House district 4 in Oklahoma or whatever,
where if you sign on to something like this, you are going to have your
primary challenger getting all this direct mail money from the conservative
grassroots, and that`s, again, the issue that`s sort of at the heart of the
dysfunction in Washington, because if you look at the Republican House,
we`re talking about the majority there, just about every member, every
Republican member of the House comes from a district that Barack Obama lost
last year. So those are members who aren`t thinking, right, about the next
national election and the next general election. They`re thinking about
the next primary election, and that just breeds the kind of mentality we
talked about with Orrin Hatch.

Anyway, I want to thank Marin Cogan of the New Republic magazine, Chris
Geidner of Buzzfeed.com, Richard Kim of the Nation magazine, and Garance
Franke-Ruta of the Atlantic magazine.

How Apple avoided billions in taxes, that`s next.

(COMMERCIAL BREAK)

KORNACKI: On Monday, Democratic Senator Carl Levin of Michigan revealed
the bombshell results of a Senate investigation into the tax records of
Apple, which managed to avoid paying billions in corporate taxes for years,
saying its Permanent Subcommittee on Investigations found that Apple used a
network of offshore subsidiaries that in many cases had no employees and
were largely run by officials at the company`s California headquarters.
One of those subsidiaries, called Apple Operations International, is
registered in Cork, Ireland. It has not filed a tax return with any
government in five years, despite bringing in a staggering $30 billion in
profits between 2009 and 2012. In effect, Apple Operations International
was a stateless entity, beyond what most tax experts have ever seen. Levin
harshly criticized Apple executives at a Senate hearing on Tuesday.

(BEGIN VIDEO CLIP)

SEN. CARL LEVIN, D-MICHIGAN: The company`s engineers and designers have a
well-earned reputation for creativity. What may not be so well known is
that Apple also has a highly developed tax avoidance system, a system
through which it has amassed more than $100 billion in offshore cash in a
tax haven.

(END VIDEO CLIP)

KORNACKI: Apple CEO Tim Cook said in testimony Tuesday that Apple paid all
the taxes it legally owed, nearly $6 billion in total in 2012. Cook also
said that Apple`s offshore cash holdings were justified.

(BEGIN VIDEO CLIP)

TIM COOK, CEO, APPLE: Our foreign subsidiaries hold 70 percent of our cash
because of the very rapid growth of our international business. We use
these earnings to fund our foreign operations, such as spending billions of
dollars to acquire equipment to make Apple products, and to finance
construction of Apple retail stores around the world.

(END VIDEO CLIP)

KORNACKI: While the sheer size and scope of Apple`s accounting practices
produced dramatic headlines this week, tax avoidance is in fact common
among multi-national companies. Levin`s committee investigated Microsoft
and Hewlett-Packard in September and uncovered similar aggressive tactics
to avoid taxation. Recent study by the group Citizens for Tax Justice
found that at least 30 of America`s largest corporations paid nothing in
federal income taxes between 2008 and 2010. And Bloomberg reported in
March that American companies may now hold more than $1.9 trillion in cash
reserves overseas. Lawmakers in both parties seem to agree that the
corporate tax code should be reformed, but they disagree about how to do
it. Large numbers of Republicans and some Democrats say they want to
establish what`s called a territorial tax system, to eliminate the vast
majority of U.S. taxes on the offshore profits of American companies.
Lawmakers on the left, such as the Congressional Progressive Caucus, want
all corporate profits regardless of where they are located to be taxed as
corporate income here in the U.S. And President Obama, for his part, has
called for a minimum tax on foreign earnings. But in a key concession to
conservatives, Obama also supports lowering the corporate tax rate overall
in exchange for closing loopholes.

I want to bring in Frank Clemente, campaign manager at Americans for Tax
Fairness. Basil Smikle Jr. from Columbia University is back at the table.
Matt Yglesias, Slate`s business and economics correspondent, and Ylan Mui,
financial reporter at the "Washington Post."

So I have to say, I don`t have a background in business, I don`t have a
background in multinational corporate tax policy. But the basic thing that
amazed me about this is that Apple seems to be doing two things
simultaneously here, where they avoid taxation in the United States, by
setting up this subsidiary in Ireland, but the board for the subsidiary
basically meets in California, and so therefore under Irish law, it`s not
subject to Irish taxation, either, so they basically found this sort of
sweet spot where there is no taxation anywhere, where there`s basically
also no employees relatively speaking at this subsidiary, and yet they`re
reporting all these profits over there. And again, I don`t know the law
that well, but it seems to be awfully sneaky.

SMIKLE: You know, I don`t consider Apple to be an Irish company, but two-
thirds of their - I think they moved their intellectual capital over to and
property rights over to Ireland. Two-thirds of their pre-tax income comes
from Ireland. Four percent of their workforce, though, is in Ireland, and
only one percent of their consumer base. So it`s just amazing, when you
talk about these numbers, and you talk about tax avoidance. I mean, that`s
startling to me. I don`t consider them an Irish company at all, but yet
that`s where their - that is where their business is.

FRANK CLEMENTE, AMERICANS FOR TAX FAIRNESS: Apple`s creativity here with
respect to where it locates itself for tax purposes is as creative as its
products. Their products are a shiny object ,a shiny jewel for all of us.
Every corporation that operates internationally now is looking at what
Apple has done and is seeing, oh, maybe we should do the same. Lots of
them are taking advantage of tax havens, but this was the most creative,
because the company let itself fall between the cracks of these two taxing
authorities in Ireland. In the U.S., we tax based on where you are
incorporated. Well, Apple says we`re incorporated over here in Ireland,
and in Ireland they tax based on where you`re controlled by. So Apple
said, we`re controlled over in California. So they avoided taxes on $104
billion in profits over the last four years. An enormous amount. That, if
you figure it, it`s probably about $30 billion that could be coming back
into the United States in terms of taxes.

KORNACKI: Matt, though, it is, what Apple did, as sneaky as it looks, is
legal, right?

MATTHEW YGLESIAS, SLATE.COM: It`s absolutely legal. They took advantage
of the fact that American law and Irish law simply treat corporate earnings
differently, and they found this kind of gap between the two systems. And
you know, what`s remarkable is as aggressive as Apple has been at this,
they are not the most successful American company in terms of avoiding
taxes. Apple is not that list of 30 companies that paid no income taxes at
all, and so it`s an incredibly ingenious system that they came up with, but
it`s not all that unusual.

KORNACKI: How does that happen, by the way? All this outrage over Apple,
they found this sort of sweet spot, but they are still paying billions of
dollars in taxes to the U.S. How do these other major companies get away
with zero? What are they setting up to pay nothing?

YGLESIAS: Well, the stimulus bill created some opportunities for companies
that -- a temporary opportunity to offset a lot of losses and to take
advantage of what`s called accelerated depreciation of their capital goods.
And so you can earn profits, but not register any accounting profits that
are taxable. And that`s how you really get down into that zero territory.
And nothing Apple was able to do was as great as what Boeing and General
Electric have been able to pull off.

YLAN MUI, THE WASHINGTON POST: (inaudible) that I think this is something
that is sort of particular to tech companies in which they are able to sort
of move money to different countries depending on which place offers the
best rate. And they are able to do it very quickly, and because they don`t
have actual physical assets to move, it is intellectual property that they
are moving around, and so they`re able to do this very nimbly. And I think
to me, that is the sort of bigger question here, if these companies are a
model for the way our economy should operate in the future, you know, how
much are they really going to be contributing to domestic growth when
they`re able to move their operations so quickly in a way that benefit
themselves and not necessarily benefit the American public.

CLEMENTE: Another -- Pfizer is an example that. Drug companies, high-tech
companies, drug companies. Pfizer generates -- we did a report called
corporate tax dodgers, just put it out on tax day. Pfizer was one of the
10 companies we profiled there. They generate about 40 percent of their
income here in the United States, and what did they pay in taxes over the
last several years? Zero. And the reason was they were claiming that most
of the profit was being generated abroad, because they were taking their
patents and basically they`d sell their patents or license their patents to
a tax haven country, and they`d run most of the income through that tax
haven country on the basis of where its patent is. So they can claim a
loss here in the United States. They end up not having to pay taxes on it,
and they claim the income, profits being generated in that tax haven
country where they pay a low tax. Because it`s a low tax -- that`s why
they put it over there to begin with.

KORNACKI: And we talk about, though, how that arrangement is legal, and
there was an interesting moment at the hearing this week, when a senator
took this a step farther. Here`s what Rand Paul had to say.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL, R-KENTUCKY: I`m offended by the spectacle of dragging in
executives from an American company that is not doing anything illegal. I
would say that what we really need to do is apologize to Apple, compliment
them for the job creation they`re doing and get about doing our job -- look
in the mirror and let`s make the tax code better, fairer and more
competitive worldwide. Money goes where it`s welcome. Currently, our tax
code makes money not welcome in this country.

(END VIDEO CLIP)

KORNACKI: Now, somebody made the point that Apple could actually be paying
a lot less in taxes if it arranged itself differently, so maybe they should
(ph) be complimented as much as Rand Paul would, but I have to say, just
listening to that, there is a certain logic, I think, to what he`s saying,
which is if you`re Apple and you have a responsibility to your shareholders
and you`re trying to minimize your tax bill as much as you can, and this
looks really bad and sneaky, and it is legal, isn`t that what your
shareholders expect of you?

YGLESIAS: I think it is. And it also is true. I mean, this is the tax
code that the Congress created. And they could create a different one.
This is not one of these cases where you`re investigating illegal
practices. You`re investigating tax lawyers being intelligent about the
tax code in a way that it`s written. And you know, these companies, as
Ylan was saying, they`re taking advantage of the fact that they don`t have
a lot of physical assets, so it`s very easy to move intellectual property,
but the people involved are still physical. And they are located
somewhere. Congress can tax the executives. Congress can tax the
shareholders. If Congress thinks it can`t find a way to sort of track the
profits internal to the company, they can still tax the people, and you
know, they should if they think we need more revenue.

SMIKLE: What it also does -- and you`re absolutely right - but what it
also does is it sends the message to the average American that the rules
are different if you`re wealthy, the rules are different if you`re a big
corporation versus a small business. And so, what`s interesting about the
hearing, is that relatively speaking, these senators were somewhat effusive
in their comments to Apple`s CEO, and he was able to really sort of change
the conversation in a very interesting and profound way. Because Apple is
such a huge part of our culture now, I don`t think anybody was really going
to go after him and attack Apple in a way that they probably could. But
again, all that does is it sends a message to the average voter, to the
average small business owner that the rules are different for them.

MUI: A lot of it also--

KORNACKI: And Ylan, you`re getting in right after this. OK.

(COMMRECIAL BREAK)

KORNACKI: Go ahead, Ylan.

MUI: Thank you. The point I was going to make was that actually, even
though we`re talking about really big numbers here, corporate taxes are a
very small portion of the overall revenue that the government takes in.
There`s something like $242 billion in corporate taxes collected in 2012.
There were $1 trillion of individual taxes that were collected. So when we
talk about this problem, you know, and problems with the corporate tax
code, et cetera, there are problems overall with the tax code, not just on
the corporate side. And so when you also think about the questions of
repatriation, and at what rates should you bring the money back, you know,
if there is a $1 trillion outstanding, you bring it back and tax it at a
rate of 10 percent, that`s still only going to get you another $100
billion.

KORNACKI: That`s one of the debates about reforming, or at least something
that can be done, is this idea of repatriation and the sort of the
holidays. The standard corporate tax rate is 35 percent, so a company like
Apple has all this money parked overseas, right, to bring it back into the
U.S. economy, they would have to normally pay a 35 percent rate, but the
calls are to give Apple and give all these other companies a chance to
bring it back now at a much lower rate. We tried this before, though,
didn`t we?

CLEMENTE: Yes. And we`ve got to get away from this game of repatriation.
That sounds really patriotic, doesn`t it, OK, let them bring it back? It`s
tax amnesty. And what it is, we tried it in 2004. A law was passed that
allowed companies to bring back their profits. They were overseas. They
brought back over $300 billion in profits at a 5 percent tax rate. 35
percent down to 5% percent. Now, most companies aren`t paying 35 percent,
but be that as it may. The companies promised that they would invest that
money in America, they would create a huge number of jobs. There were
numerous analyses that were done afterwards, found that virtually no jobs
were created. In fact, many of the same companies reduced their workforce
after 2004, and the money went to stock repurchasing and it went to
dividend payments to shareholders, which is mostly to rich folks. So it
was a bust, and everybody knows it`s a bust, and if people try and promote
it again, there is no way we can--

(CROSSTALK)

KORNACKI: It seemed like it created an incentive, right? It happened once,
and so all these companies felt if we just stockpiling again, start putting
up the pressure again, and we`re hearing now the same call. This is sort
of - I hear there are Democrats calling for this this, too, this is not
just conservative Republicans trying to protect business.

SMIKLE: Right. And to your point in terms of what benefits will the
American public get if these dollars do come back to the United States,
that`s actually my biggest concern. Are these companies going to, as
promised, hire American workers? Are they going to bring the jobs back as
well? And the thing for me and for labor unions, particularly if you live
in a state that`s heavily unionized, and elected officials, that`s the
biggest question they are going to have.

KORNACKI: But that 35 percent rate, because I`ve heard the line -- I hear
it from the Republican Party all the time. We have the highest corporate
tax rate in the world. Right, no one has it at 35 percent. And I know the
case there, the argument there sort of against that is, well, how many are
actually paying 35 percent? Functionally, it`s not 35 percent. But that
just screams there`s some need for reform there.

CLEMENTE: The subcommittee, the Senate subcommittee that uncovered this
Apple stuff, what they said, in 2011 they looked at Apple`s taxes, and
Apple at that point in time was claiming they were paying 25 percent in
their SEC filings. The subcommittee said no, they`re paying 20 percent.
Why is that? Because Apple was counting what they were paying the foreign
governments in taxes and what they were paying the state and local
governments. If you just counted what they were paying the U.S.
government, it was 20 percent. So it`s not 35 percent, it`s 20 percent.

KORNACKI: And their actual -- I saw something, too, that their actual
effective rate, when you account for all the overseas money, comes down to
only 12 or 14 percent or something like that.

But Matt, I think you had a slightly different take, though, on what Apple
should be taxed and what companies like that--

YGLESIAS: We were talking about the repatriation question. It is
absolutely true. I mean, if you think these companies are going to bring
the money back, and create lots of jobs, that`s a fairy tale. What they
are going to do is they are going to bring the profits back and then they
are going to pay the profits out to their shareholders. That`s what the
company is there for. But when you pay your shareholders, the shareholders
themselves are taxed. And if you want to talk about a tax loophole, is
that income from dividends and capital gains is taxed at a much lower rate
than ordinary income you get from wages and salaries. And that seems to me
by far the best way to make up those revenue is to look at those investors
and to say, you know, we`re taxing people. The people can`t relocate
themselves to Ireland on paper. You know, if you are living in the United
States, you`re subject to the IRS. And we should go after the rich
investors and things like that, because the corporate income tax stuff,
it`s quite complicated. There is a reason that companies are all paying
these very different rates. And it`s because there is a lot of monkey
business going on, because we do want companies to be able to make profits
and then reinvest them in things, and the biggest tax benefit that
companies get have to do with the accelerating depreciation, manufacturing
companies like them. You know, politicians always want the companies in
their home state to be able to sort of get that revenue and reinvest. And
we should look at shareholders and we should look at executives.

MUI: That`s an entirely different tax debate as well, though. I mean,
capital gains reform has been - I mean, the tax (inaudible) had only gone
down over time, it hasn`t exactly gone up. And so I think that would be--

YGLESIAS: It just went up this year.

MUI: Not significantly. I think that that question is just as volatile
and just as controversial as trying to reform the corporate tax code.

KORNACKI: But that also gets to -- what Matt (inaudible), I think Ezra
Klein wrote something about this this week, too, which was basically, let`s
not be having this debate about the corporate tax rate. That`s sort of a
broken system. Let`s talk about raising the capital gains tax, let`s talk
about raising high income tax rates. How much would you have to raise
those rates to make up for what you would be losing on the corporate side?
Do we have a sense of that? Are we talking like sky hate rates here or
something that is practical?

CLEMENTE: Well, one way to think about it, President Obama, well, Senate
Democrats, the budget resolution that they passed called for $1 trillion in
new taxes over 10 years. You know, you could do $400 billion from
corporations. You could do $600 billion from individuals. There`s lots of
ways, everybody, the Republicans in particular, they say you can`t raise
taxes on wealthy folks. What Matt was just talking about, you could put
the capital gains tax rate and the dividends tax rate back to what`s called
ordinary income, which is the rate that you`re paying your taxes at. Now
it`s at 20 percent. It just went up from 15 percent to 20 percent in a tax
bill that passed at the end of the of the year. You could put it back to
the ordinary income tax rate, and so they would be paying - they would be
paying - what people pay on wages, they would now be having to pay on their
stocks and dividends and things like that, at the ordinary rate. It would
raise you probably $500, $600 billion over 10 years. That`s a huge amount
of money. Those folks are the people who can most afford to pay a lot more
in taxes. That is where we ought to be going, but I think we ought to do
both. I don`t think we should let the corporations off the hook. They
need to pay their fair share. They have not contributed a dime towards
deficit reduction at this point in time. But all these, but average
Americans have had to contribute. The payroll tax went back up. But more
importantly, programs are being cut across the board. Remember the FAA and
the food safety and the HeadStart -- everybody is paying to help reduce the
deficit. Corporations haven`t paid a dime, and it`s time they do.

(CROSSTALK)

KORNACKI: After this.

(LAUGHTER)

(COMMERCIAL BREAK)

KORNACKI: And Basil was about to say?

SMIKLE: You were talking about tax breaks earlier, and it just seems like
with the combination of tax breaks and the revenue - the taxes that
corporations do pay, it`s almost revenue neutral. And with respect to the
effective tax rate, since the 1960s, we`ve gone from sort of 42 percent
down to about 17 percent. And if we`re going to reform this to tax
shareholders, my concern is that that moves to the payroll tax, that moves
to income tax, and everything will have to go up significantly to be able
to cover the shortfall. So I`m concerned that if we do any kind of reform
that takes - that significantly minimizes corporate taxation or completely
eliminates it, that it`s still going to come out of the pocket of the
average person in a much more deleterious way.

KORNACKI: John McCain actually was sort of making that point this week,
that anything we are losing in terms of companies hiding out overseas and
avoiding taxes, anything we`re losing, somebody else is paying for. It was
kind of interesting to me to hear John McCain. I know this has been the
week he revolted against the Republican Party, but it was interesting to me
to hear him say that.

YGLESIAS: He does seem to be back in a sort of maverick mode on a number
of issues, which is interesting. You know, at the same time, you look at
Apple, and you look at their main competitor in the telephone space is
Samsung, is a South Korean company. Their main competitors in computer
manufacturing are from Taiwan and from China often now. The multi-national
companies, they really are multi-national, and they`re competing across
nations. And one reason the Apple hearings were interesting is that it`s
such an iconic American company. And you know, American politicians from
both parties, they really do want to see American companies do well, and so
that becomes the tension here. You know, you see a company domiciled in
the U.S. not paying taxes on its foreign profits -- people get a little
concerned. But also, they are really glad that those profits sort of
belong to an American company.

KORNACKI: Which - I want to show this. You talk about the pride of the
senators in a company like Apple. It was on full display this week. Take
a look at this.

(BEGIN VIDEO CLIP)

SEN. CLAIRE MCCASKILL, D-MO.: I love Apple. I`m Apple, I made all my
family -- I harassed my husband until he converted to a Macbook.

LEVIN: This brilliant intellectual property, which everybody that I know
of applauds.

SEN. JOHN MCCAIN, R-ARIZ.: What I really want to ask is why the hell I
have to keep updating the apps on my iPhone all the time?

(END VIDEO CLIP)

KORNACKI: I think my favorite thing is the yellow protector that Carl
Levin has on his iPhone. But I mean, this is the same committee that in
one breath is just horribly outraged by hiding the profits, and then the
next moment it`s, love your products, love your company.

MUI: Yes, so the question here is, is there going to be a consumer impact?
Are consumers, the average purchaser of Apple products, whether it be a
person on the street or whether it be someone sitting in the Senate, are
they going to change their decision-making process because of this? And
you know, quite frankly, I don`t know that we`re going to see that happen.
You saw a boycott try to get organized around Apple`s treatment of its
workers in China. That did not take off, clearly. And if you`re not going
to boycott a company over the way it treats foreign workers, you`re going
to boycott the company over the fact that it pays less in taxes? Which is
something that, you know, quite frankly, everyone tries to do and every
business tries to do. I think it is going to be very tough before you see
consumers, sort of the tide of consumer sentiment turn against Apple.

CLEMENTE: What I hope about this - I agree, they`re not going to boycott
Apple products. But what I hope is that it`s a wakeup call for the
American consumer to really understand what`s happening. The tax issue is
a relatively opaque issue. It`s very hard to explain to folks. But Apple,
this lesson from Apple really, I think, illustrated the problem. A great
company that has a very good corporate culture that you think is a very
honest company is doing something that may not be illegal, but is
definitely against the spirit of the law. And actually, I think the IRS
needs to go after them. We can talk about that in a minute. But I hope
this is a wake-up call for American consumers who -- as I understand,
you`re paying -- when Apple doesn`t pay, it means you pay more.

Small business owner, you`re a sole proprietorship. He`s paying more in
taxes because other small businesses on Main Street are paying more in
taxes because Apple is not paying enough. And so there is a debate which
is brewing in Congress on corporate tax reform. And it may - it is
happening now. It may not happen this year, because there is lots of
challenges, lots of competing interests with various industries and
corporations. But we, the consumer, the public has got to get engaged in
this battle. It has a direct stake, direct interest in it, and we`ve got
to make corporations pay more. Make them pay their fair share.

KORNACKI: And that`s something that the president himself has been talking
about, and I want to play what he had to say after this.

(COMMERCIAL BREAK)

KORNACKI: We were just getting into the broader push for corporate tax
reform, and it`s something the president talked about before. This is a
couple of years ago, but this is him sort of laying out his principles on
that.

(BEGIN VIDEO CLIP)

OBAMA: Over the years, a parade of lobbyists has rigged the tax code to
benefit particular companies and industries. Those with accountants or
lawyers to work the system can end up paying no taxes at all. But all the
rest are hit with one of the highest corporate tax rates in the world.
That makes no sense, and it has to change.

So tonight I`m asking Democrats and Republicans to simplify the system.
Get rid of the loopholes. Level the playing field. And use the savings to
lower the corporate tax rate for the first time in 25 years without adding
to our deficit.

(END VIDEO CLIP)

KORNACKI: He`s laying out basic broad perimeters of a compromise there for
Republicans, like I`ll get you the lower corporate tax rate, but we are
going to have to do loopholes and what he`s talking about there. But you
know, feasibly, is there a way -- you look at like - you look at this money
that Apple has overseas. Is there a way they can just tax it? You can
just say, hey, we`re now taxing overseas profits? Is that - something like
that could ever happen?

YGLESIAS: Well, I mean, you know, it`s the Congress. They can do what
they want. They can make the law say whatever they want to say. You know,
the concern you have to have is at some point, you might actually scare
companies away from operating in the United States, but there is clearly a
large margin at which you can get more money out of Apple and Apple is
going to stay in California and stay happy.

KORNACKI: I mean, what is that -- we always hear that, sort of, if we
scare them away. What is that breaking point? Do we have any sense of it?
Right now, they have all this, billions of dollars overseas they`re sort of
afraid to bring back here because of taxes. What is that breaking point?
What is that balancing point, I guess?

CLEMENTE: A lot of this is corporate PR spin. OK? I mean, in terms of --
U.S. corporations, their effective tax rate is actually lower than European
companies. Now, I don`t know, it`s not lower than these tax havens, but is
that where we want to go? I mean, we can compete on taxes. If you look at
the comparison for all the what`s called the OECD countries, those
companies that we compete against, the U.S. is towards the bottom in terms
of overall taxes. When you add up federal taxes, state and local taxes and
foreign taxes. So our companies are not heavily taxed compared to the rest
of the world. This is simply they want to maximize their profits, they
want to maximize what they can keep and give to their shareholders, and
they don`t want to contribute to the deficit reduction or to investing here
in America, and that`s got to change.

SMIKLE: Thank you for bringing up the fact that I`m a small business
owner. I think I`m going to take my talents to Jamaica.

(LAUGHTER)

SMIKLE: I think you`re absolutely right, and I don`t feel bad for Apple,
they`re sitting on $100 billion in cash. They can afford to pay more. And
you are absolutely right.

MUI: I think the bottom line is that -- the question for the economy is,
is this money going to help, go toward jobs, is it going to help to
(inaudible) growth? Is it going to be invested back into the country? And
the problem right now with the economy is not that corporations don`t have
money. They are sitting on record amounts of cash. There`s $1.8 trillion,
in corporate balance sheets right now, and so you know, how to solve the
disconnect between how the biggest companies were doing it performing, you
know, how Wall Street is performing, and where the average person is sort
of feeling the improvement in the economy, and that`s going to be where the
rubber meets the road, and that`s going to be the real question of the
economy going forward.

SMIKLE: And just to make a point, you were saying earlier about traction.
I think maybe the factory collapse in Bangladesh gives this a little more
traction, because it does focus attention on the fact that these companies
are there and the standards are different. But to your point, I think one
of the things that is not discussed as much is basically how do U.S.
companies feel about American workers, and the fact that they feel that
American workers aren`t up to the task, aren`t as skilled, and don`t have
the same kind of or similar work ethic as some of these foreign workers.
And I think that is missing from some of the argument. I want to hear the
senators get into that a little more as well.

KORNACKI: In Apple, too, one of the reasons that Apple does so much in
China, it`s partly because of the supply chain. It`s so much more
efficient and things are happening in China that just can`t happen in the
United States. But it is interesting, too, when you look at Apple as this
sort of (inaudible) -- we think of it as sort of the quintessential
American company. You think of the old days, right, the old days of the
big automobile powerhouses or whatever, and you look at what they employed
in this country versus what Apple employs now. It`s like a fraction of
what the big auto companies used to be. This is now the big American
company, right?

MUI: Again, what you`re talking about here is, are companies unhappy with
American workers? Are they - do they feel like they can get better
productivity or what have you abroad? That`s a question of is there
something structurally wrong with our economy? And that`s a huge debate
that is going on right now. Is the problem with the economy simply demand,
that you know, that we went through a big recession, people are not
spending as much et cetera, is the problem the fact that there is a
mismatch between the skills that our workers have and the demand that the
companies are looking for.

SMIKLE: I`m sorry. But I think about that factory in China, where Apple
had to redo their screens and the -- I guess the foreman or the manager of
the factory roused workers who were in the dormitory, by the way, like an
old factory town, rousted them out of their sleep to go ahead and redo
these new phones. So there is that disconnect. I can`t imagine that we`re
going to go back to that.

KORNACKI: All right. My thanks to Frank Clemente of American for Tax
Fairness. Basil Smikle Jr. of Columbia University. Matt Yglesias of
Slate.com, and Ylan Mui of the "Washington Post." Thanks for getting UP.

My thoughts on Memorial Day after this.

(COMMERCIAL BREAK)

KORNACKI: We`ve got legendary political commentator Norm Ornstein joining
us next weekend. So be sure to tune in Saturday and Sunday at 8:00 am.
Eastern time. And in just a moment, "MELISSA HARRIS-PERRY." On today`s
"MHP," me.

That`s right. I`m joining Melissa as she dives deep on the right-wing
litmus test taking place right now in the crucial swing state of Virginia.
Republicans are offering a slate of candidates that could redefine the
conservative movement if they win. That and the name game. Just who are
the members of Congress voting to take food off the table of hungry
Americans? That`s "MELISSA HARRIS-PERRY," and she`s coming up next.

But first, a few thoughts on Memorial Day. On March 26, 2005, landmine
exploded in Kabul, Afghanistan, killing Army Master Sergeant Michael T.
Heester (ph) and three of his fellow Indiana National Guardsmen, Captain
Michael T. Fiskus (ph), Specialist Brett M. Hershey (ph) and Private Fist
Class Norman K. Snyder (ph). Heester had been deployed in Afghanistan,
excuse me, deployed in Afghanistan since 2004. He was weeks away from
returning home on leave to his wife and two children in Bluffton (ph),
Indiana, that is where he had been a firefighter for over 13 years.
Heester was 33 years old when he died. Today Heester`s sister, Michelle
Markham (ph), remembers him as an honest and forthright man. She says he
wasn`t the kind of person who just said he believed in something. He
showed it. She said he was always looking out for the underdog.

On Monday, Michelle wrote about what Memorial Day means to her in a blog
post for the Tragedy Assistance Programs for Survivors, or TAPS. TAPS is a
group that provides 24/7 support for those who have lost a loved one in the
military. She writes, quote, "I remember well when Memorial Day was all
about a three-day weekend which would propel us into the summer. It meant
produce stands would begin popping up along county roads, and plastic
flower vendors would peddle their gaudy bouquets in any available parking
lot, reminding passersby to pay their respects at the nearest cemetery.
Memorial Day meant that there -- that school days were over. Life was
about to become f-u-n."

Michelle says she misses those days, but she explains that the holiday now
fills her with a sense of renewal as the country pauses to remember her
brother and all those who have made the ultimate sacrifice. "For one day,"
she writes, "the whole nation remembers our fallen. For one day, they
remember our loved ones. For one day, they remember my brother. And they
mourn with me."

"Yes," she continues, "I know it`s not really the whole nation doing this.
Pretty certain it`s a minuscule percentage of the population that can even
define what the purpose of the holiday is. But I sometimes prefer blind
optimism to disappointing reality."

Tomorrow is the ninth Memorial Day since Michael Heester died. As Michelle
and her family have done for years, they will visit his gravesite.
Tomorrow is a day to remember Michael and all of the men and women who have
died in combat. As Michelle writes, "time passes whether we want it to or
not. But I will stop on this one day and simply remember. Remember the
love, celebrate the life, share the journey. How fitting that the root
word of Memorial is memory."

Happy memory day, everyone.




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