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All In With Chris Hayes, Wednesday, August 7, 2013

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ALL IN with CHRIS HAYES
August 7, 2013
Guests: Miriam Elder, Chrystia Freeland, Josh Barro, Norm Ornstein, Mattie
Duppler


EZRA KLEIN, GUEST HOST: Good evening from Washington, D.C. I`m Ezra
Klein, in for the terrific Chris Hayes.

Tonight on ALL IN:

The Cold War may be over, but it doesn`t feel like it`s all that over.
It`s getting chilly actually. From the Edward Snowden situation to
Russia`s treatment of gays and lesbians, U.S./Russian relationship is on
the rocks.

Also tonight, something else is not really open, the threat to the U.S.
from al Qaeda. Today, we`re learning about another terror plot that was
foiled.

What do New York City and Detroit have in common? If you listen to one New
York politician -- it is bankruptcy.

All that is ahead.

But, first, do you remember this little hot mic slip during the election?

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is my last election.

THEN-RUSSIAN PRESIDENT DMITRY MEDVEDEV: Yes.

OBAMA: After my election, I have more flexibility.

MEDVEDEV: I understand and I will transmit this information to Vladimir.

(END VIDEO CLIP)

KLEIN: I will transmit this information to Vladimir.

It is such a great line. It is so sinister-sounding.

And people thought at the time, it was a big scandal. People thought they
knew what it meant. President Obama was secretly, quietly telling Dmitri
Medvedev to tell Putin to ignore all the election year posturing, that it
was just politics. That after the election, the U.S. and Russia could be
great friends. They could get a lot done together.

Maybe that wasn`t what it meant. Maybe the flexibility that Obama was
speaking about Medvedev was transmitting was a great insult. A yo mama
joke, perhaps. That would better explain what has happened since. U.S.-
Russian relations are deteriorating at a very rapid pace.

Today, the president cancelled a planned meeting with Russian President
Putin. The first time any American president has cancelled a publicly
announced visit to Russia since the end of the Cold War. The White House
explained the decision with a laundry list of Russia`s policy failures of
the last 12 months, including missile defense, and arms control, trade and
commercial relations, global security issues, human rights and civil
society.

And, of course, they cited Russia`s decision to thumb the U.S. in the eye
by granting NSA leaker Edward Snowden temporary asylum, as contributing
factor, something the president touched on in an interview with Jay Leno
last night, too.

(BEGIN VIDEO CLIP)

OBAMA: I was disappointed because, you know, even though we don`t have an
extradition treaty with them, traditionally, we have tried to respect if
there`s a law breaker or an alleged law breaker in their country. We
evaluate it and we try to work with them. They didn`t do that with us.

(END VIDEO CLIP)

KLEIN: In that same interview, the president spoke out forcefully against
Russia`s gay propaganda law, which outlaws homosexual propaganda.

(BEGIN VIDEO CLIP)

OBAMA: I have no patience for countries that try to treat gays or lesbians
or transgendered person in ways that intimidate them or are harmful to
them. Now, what`s happening in Russia is not unique. But one of the
things that I think is very important for me to speak out on is making sure
that people are treated fairly and justly, because that`s what we stand
for. It`s a precept that`s not unique to America. It`s just something
that should apply everywhere.

(END VIDEO CLIP)

KLEIN: That law which bans gay pride rallies and imposes fines for giving
information about lesbian, gay, bisexual and transgender communities to
minors has sparked outrage across the world even in some unexpected places.
In fact, Jay Leno himself last night made a pretty extreme analogy about
the law.

(BEGIN VIDEO CLIP)

JAY LENO, TONIGHT SHOW: To me, this is Germany in 1933. I mean, I think
you and I are of that generation when I was in school, they never told you
how did that happen. Well, how, I mean, OK. Hitler becomes dictator, and
he rounds up all the Jews.

Yes, but how did -- this is how it starts. You go for the homosexuals.
Oh, and then you go for the Jews. And then pretty soon they come for you.

(END VIDEO CLIP)

KLEIN: The public`s attention is now squarely focused on Russia`s human
rights abuses, and the president of the United States weighing in on them
so publicly, it means something. It means that the relationship between
the U.S. and Russia is in rapid decline. The president is no longer trying
to stop it.

It`s a relationship that just a few years ago seemed to be on the mend. It
was called the big reset. President Obama and then-Russian President
Dmitri Medvedev, not only seem to personally like each other. They were
getting stuff done on arms reduction, for example.

Today, that promise of a normal healthy relationship between the two one-
time adversaries is all but gone, and Obama`s forthright criticism of
Russia last night was basically just an acknowledgement of that.

But to understand how we got here, you don`t just need to know about
Russia`s new gay propaganda law or about NSA leaker Edward Snowden, who`s
now living in Russia. You also need to know about Syria, which for two
years has been embroiled in a brutal civil war between government forces,
united behind Syrian President Bashar al-Assad, and rebel forces, over
90,000 people have been killed and Russia staunchly supported the murderous
Assad regime, repeatedly blocking sanctions against the Syrian regime, in
the United Nations, and providing arms and aid to Syrian government troops.

In June, President Obama announced that the U.S. would send weapons and aid
to rebel forces. And just hours ago, he announced almost $200 billion more
in humanitarian assistance for the country.

Syria is a place where the U.S. and Russia have most publicly clashed over
the past few years. Edward Snowden is just the latest flair up in that
relationship. But the anger breaking out into public and becoming
diplomatic snubs, that -- that is something new.

Joining me now is Miriam Elder, foreign and national security editor for
Buzzfeed.com, and former Moscow correspondent for "The Guardian" newspaper.
And Chrystia Freeland, author of the book, "Sale of the Century: Russian`s
Wild Ride from Communism to Capitalism", and now running for a seat in
Canada`s parliament.

Thank you both for being here.

MIRIAM ELDER, BUZZFEED.COM: Thank you.

CHRYSTIA FREELAND, AUTHOR, "SALE OF THE CENTURY": Great to be with you,
Ezra.

KLEIN: Miriam, I want to begin with you, because this does feel like
something new has happened here, it does feel like both sides in the last
couple of weeks have given up in way that wasn`t sure a couple of months
ago. The Snowden snub did not have a lot of upside for Russia, as far as
anybody could tell. And now the cancelling of this meeting seems somewhat.
It seems that both sides are now somewhat content to begin getting into a
bit of a tit-for-tat.

ELDER: I think Russia`s been trying for a long time to get into some sort
of a fight with the United States. A whole bunch of stuff has happened
over the past few months that some have forgotten, Russia kicked out the
U.S. Agency for International Development. Russia cancelled the right for
Americans to adopt Russian children. There was a huge spy scandal a couple
months ago.

So, Russia has been poking for a while. The Obama administration has
finally realized this is a government that we can`t really work with.
There`s certain this that the Obama administration accomplished early on,
including renegotiating the START Treaty on nuclear weapons.

As the issues get more and more complicated including Syria, I think
there`s been a recognition that there`s not much they can do, what`s the
point of meeting.

KLEIN: Chrystia, what`s behind the poking? What does this look like from
the Russian side? What is their kind of narrative and breakdown of the
relationship?

FREELAND: I think this is very much a story about what is happening inside
Russia and about the kind of Russia and the kind of power base that Putin
is trying to build. I think he`s consciously chosen to play to but also to
create an ultra-nationalistic, very conservative, very intolerant
constituency inside Russia as his power base. And that`s a constituency to
which he`s been playing to his terrible attitude toward gay people.

That`s a constituency to which he`s playing with his aggressive stance
toward western countries, toward the United States. That`s a constituency
to which he`s playing with an incredibly fierce and incredibly deep
crackdown on all of the liberal forces in Russia.

You know, for me, actually, the turning point was something not that
noticed. But it was the fact that Sergei Goryev (ph), who was the leading
Russian economist and academic, a very serious guy, a real, you know, your
kind of guy, Ezra, a Russia wonk, not a very political figure, he has left
Russia, because he decided it was too dangerous for him to stay there.

So, all of the internal liberal forces are being repressed. A nationalist
constituency is being whipped up internally, and part of that is having a
bellicose attitude toward the West.

So, this is mostly a vote change inside Russia. And I think it`s something
we should be worried about.

KLEIN: And, Miriam, what`s behind that change. It`s not as if Putin is
under enormous threat from electoral competitors. Why after Medvedev
change the nature of his politics like that?

ELDER: Well, actually, quite a few protests broke out around the time of
Putin`s return to the presidency. And I think it was a challenge that he
just didn`t expect. And he`s building this sort of regime where he`s
closing in upon himself. He`s getting fewer and fewer advisers to himself.
He seems to be growing increasingly more paranoid.

And although the liberal threat is quite small, there`s some middle class
protesters in Moscow that have never really numbered more than 100,000 in
the streets, to an authoritarian regime, which I think Putin is. Any show
of criticism is taken as a major threat.

KLEIN: And, Chrystia, where is --

FREELAND: If I can?

KLEIN: Yes, please.

FREELAND: I was going to say, I agree with Miriam, this is an
authoritarian regime. Authoritarian regimes by their very nature are
paranoid.

And I think another thing to bear in mind is the Russian economy is not
totally robust. You know, Putin has some things to worry about there, and
I think his bet all along has been people will tolerate in Russia a lack of
democracy, so longs he can deliver really strong economic performance.
That performance is by no means guaranteed.

So, I think he is trying also to secure his regime with this sort think his
bet all along has been people will tolerate in Russia a lack of democracy,
so longs he can deliver really strong economic performance. That
performance is by no means guaranteed. I think he is trying also to secure
his regime with this sort of very powerful aggressive, not very nice for
the rest of the world or for liberals inside Russia, nationalist power
base.

KLEIN: Miriam, you talked a moment ago about how you felt the Obama
administration was slow to recognize that turn in Russian politics.
There`s a comment Obama made that the Russians remain in a cold war
mentality. He keeps trying to convince everyone we`re not in the Cold War
anymore.

It almost sort of portrayed the Russian-U.S. relationship is like a
pathology, like they can`t snap out of it. To what degree do you think
they are actually getting or understanding the nature of the challenge they
face in this relationship now?

ELDER: I think in the beginning the Obama administration was very hopeful,
maybe to the point of being a bit naive. They did take a lot slaps in the
face, the ones I mentioned before about closing USAID, various things. But
it seems to me that so much has happened, you can`t forget also what`s
happened to the American presence on the ground in Moscow. We have an
ambassador who was harassed for months and months by Kremlin youth groups.

And I think that there has been a change in understanding finally.

KLEIN: Miriam Elder from BuzzFeed.com and Chrystia Freeland, author of the
book "Sale of the Century" -- thank you both for being here.

ELDER: Thank you.

KLEIN: And now, a quick real time correction, earlier I said the U.S.
would be sending almost $200 billion in humanitarian assistance to Syria.
That`s a mistake. It`s $200 million. That M to B is a big difference.
Sorry about that.

Coming up, the past several days have been a little unsettling. First, the
closing of 19 U.S. embassies because of the chatter that was similar to
what was picked up before 9/11. And now, news of another foiled al Qaeda
terror plot. We will get the latest on the news from Yemen for NBC`s great
Richard Engel, next.

(COMMERCIAL BREAK)

KLEIN: For a good while there, maybe you weren`t thinking much about al
Qaeda any more. But with the news this past week, two terror plots have
been discovered, the threat isn`t over. Richard Engel is here with the
latest next.

And, first, Austrians tried to convince us the U.S. was becoming the next
Greece. Now, you won`t believe who is using the temple of Detroit to
suggest an austerity bomb for New York City.

Those stories are coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Whenever we see a threat stream that is specific enough, that we
can take some specific precautions within a certain time frame, then we do
so. Now, you know, it`s a reminder that for all the progress we made
getting bin Laden, putting al Qaeda between and Pakistan back on its heels,
that, you know, this radical violent extremism is still out there.

(END VIDEO CLIP)

KLEIN: That was the president last night discussing the threat that led to
shuttering of American embassies and consulates in 22 countries across the
Middle East and Africa. U.S. took that extraordinary step after
intercepting communications between two top al Qaeda leaders. Ayman al-
Zawahiri, al Qaeda`s global leader, and Nasser al-Wuhayshi, al Qaeda`s
leader in the Arabian Peninsula. The two men talked about wanting to
launch a major attack in the region to coincide with an Islamic holiday, a
sign in recent days of the group`s ongoing presence in the region --
something the president addressed again this afternoon, while speaking to
troops at Camp Pendleton.

Mr. Obama acknowledged the work of U.S. diplomats working to safeguard
American interests, yet sounded downright Bushy in his remarks on terror.

(BEGIN VIDEO CLIP)

OBAMA: Al Qaeda affiliates still threaten our homeland, still threaten our
diplomatic facilities, still threaten our businesses abroad. And we`ve got
to take these threats seriously and do all we can to confront them.

We`ve been reminded of this again in recent days. Here`s what those who
would cowardly attack our civilians don`t get. The United States is never
going to retreat from the world. We don`t get terrorized.

(END VIDEO CLIP)

KLEIN: Today, Yemeni authorities said they foiled an al Qaeda plot to
attack commercial, oil and gas facilities and takeover area ports. U.S.
officials tell NBC News they do not discount Yemen`s claim about disrupting
a plot, but that plot is unrelated to the ongoing threat of Western
interests.

U.S. intelligence officials are still tracking that threat. For more on
this, we go to NBC News chief foreign correspondent Richard Engel in Cairo.

(BEGIN VIDEOTAPE)

RICHARD ENGEL, NBC NEWS CHIEF FOREIGN CORRESPONDENT: I think, Ezra, it`s
quite indicative of the way things are in Yemen these days, when the
government comes out and announces it has foiled a major al Qaeda plot to
blow up several commercial oil and gas facilities and take over at least
two ports, that the reaction is, mostly from the United States, we`ve heard
that kind of thing before. This kind of thing happens all the time.

U.S. officials aren`t doubting this was true, that there was an al Qaeda
plot to attack us. They`re just pushing back and saying, that wasn`t the
plot that caused the embassy closures that caused the worldwide travel
alerts, that was another al Qaeda plot.

I think to understand the situation in Yemen, you need to know a little bit
about the country`s history, and the history of al Qaeda in the Arabian
Peninsula. About two years ago, the al Qaeda in Arabian Peninsula
controlled, which is based in Yemen, controlled large parts of the country.
It actually had a mini-state in southern Yemen.

I went down there with the heavy military escort and we toured some of the
areas that had just been liberated by the army, just been liberated by a
military campaign, backed by the United States, backed by Saudi Arabia.
What happened after this very long, very bloody military campaign, al Qaeda
in the Arabian Peninsula did what was described as a tactical withdrawal.

They left the deep south and they moved to three other areas. They moved
to Marib (ph), they moved to Shablah (ph), and they move to an area called
Joaf (ph). These are very remote, these are mountainous, difficult to
reach areas, and they`ve been able to establish a stronghold there, and
haven`t really been threatened or challenged in these remote areas.

Al Qaeda in the Arabian Peninsula is not a large group. It`s core
membership is maybe just 1,000 people. These are the diehard militants,
the ones who would perhaps kill themselves rather than be arrested.

But around that, they also have another few thousand supporters, those who
work for them, collaborate with them, and then maybe another layer of
people who are sympathetic. But that`s just part of the mosaic in Yemen.

Then, there are the tribes. The tribes in Yemen are groups that just want
to be independent. They don`t recognize the authority of the government.
They don`t want the government to move through their territory.

So, the Yemeni government while we talk about it as a government is very
limited in its capacity. It had to do a full-on military operation backed
by Saudi Arabia and the United States, just to liberate some territory from
al Qaeda, and only to see those al Qaeda militants to escape out. And now,
it`s been struggling to convince the tribes and to convince other groups in
that country to allow it to chase down the militants and hunt them in the
remote areas.

It`s a very difficult situation and it is not the last we`ve heard, Ezra,
of al Qaeda in Arabia.

(END VIDEOTAPE)

KLEIN: NBC News chief foreign correspondent Richard Engel -- thank you
very much.

New York City is not Detroit, and I will tell you why, next.

(COMMERCIAL BREAK)

KLEIN: Remember when the scary Republicans used to tell their base before
going to bed at night, was that if they weren`t good and they didn`t cut
social services for poor people and pass the Ryan budget, the U.S. would
become Greece?

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: All the federal and state deficits getting so out of
control, that America is rapidly becoming the next Greece.

UNIDENTIFIED MALE: What`s his motivation for not dealing with the spending
problem? Does he want us to become Greece?

SEAN HANNITY, FOX NEWS: We are going to have $25 trillion in debt that
puts us on a path to becoming Greece. The country`s going to burn.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: What`s calamitous is the track
we`re on as a nation, we`re becoming Greece.

(END VIDEO CLIPS)

KLEIN: The country will burn.

You know what the U.S. did not become? Greece. You know why we did not
become Greece? Because we are not Greece. Greece is a tiny economy that
doesn`t control its own currency and can`t even raise taxes on its people
because they won`t collect.

Do you know what we are? The largest economy the world has ever known. Do
you know what we do? We control our own currency. You know what that
currency is? The dollar -- the currency the rest of the world relies on.

Do you know what we`re not part of? The euro, which is at the core of
Greece`s problems. And here`s one more reason we`re not Greece. We`re
running a much lower deficit than expected than all those horrid
predictions expected.

According to the Congressional Budget Office, if the current laws that
govern federal taxes and spending do not change, the budget deficit will
shrink this year to $462 billion, which is the smallest shortfall since
2008.

So why bring all this up? Why bring up the ancient history of the Greece
scare? Well, the Republicans have had to move on to the Greece thing.
They`re finding a new nightmare scenario that we will become if we don`t
pass their agenda into law.

New York`s Mayor Michael Bloomberg has begun raising the specter of
Detroit, warning that New York is headed for a similar fate if it doesn`t
do something about the city`s unions and pension and health care costs.

According to "The New York Post," Bloomberg said cities across the country
all face the prospect of pension costs, more and more of their budget and
New York is no exception.

And, look, as you can see from this chart, there`s no doubt. No doubt at
all, that pensions and health care costs are a problem. But they`re not
the only problem and they weren`t really Detroit`s problem. You want to
see Detroit`s problem, look at this graph.

In 1950, there were almost 2 million people in Detroit, 2 million. Now
that number is down to around the 700,000, which means, when your city is
shrinking like that, you end up with an eroding tax base. It`s incapable,
completely unable to pay off the pension costs that were incurred during
times when Detroit was more prosperous. And also not just pensions, but
city services, infrastructure, all of it.

In comparison, over that same period of time, New York has seen its
population grow by more than half a million people, it`s not been Detroit.
And another thing, Detroit`s economy has been nothing short of
catastrophic. According to the city`s own bankruptcy court declaration,
from 1972 to 2007, the city lost approximately 80 percent of its
manufacturing base.

New York`s economy by contrast has been booming, booming under Bloomberg,
by the way. And for better or worse, its key industry, finance, remains
atop the world. One factor behind Detroit`s deindustrialization is that
the fact that the city remains utterly and unbelievably racially
segregated.

This is a residential map of Detroit, with dots corresponding to the racial
makeup for neighborhoods. During the white flight of the `50s and `60s,
the white middle and business classes took their wealth with them to the
suburbs and destroyed the city`s tax base. Guess which dots represent
black and white?

New York, God bless it, looks nothing like that -- which is not to say New
York doesn`t have problems, or won`t have problems, or won`t need reforms
and changes. But this habit politicians have a habit of picking whichever
city that is worse off and using it as a cudgel to pass an agenda they`ve
wanted to pass all along, it`s not a good habit.

Joining me now is Josh Barro, politics editor for "Business Insider".

Josh, it`s good to see you.

JOSH BARRO, BUSINESS INSIDER: Absolutely. Thanks, Ezra.

KLEIN: Josh, you have a bit of a different take here, I know. Give me
your take on whether New York could ever become Detroit?

BARRO: Well, I think the key thing you said in there, New York`s not
Detroit because the finance industry is riding high. The finance industry
is actually about doubled as a share of an American economy over the last
30 years. And that`s what brought New York out of its last fiscal crisis
in 1970s, when New York was in a situation that in a lot of ways looked
like the situation Detroit was in now, people thought New York might go
into bankruptcy. Ultimately, the government of New York state had to
effectively save New York City from bankruptcy.

And what brought it back was the massive growth of Wall Street producing
tremendous tax receipts, driving up the value of real estate, and that`s
taking us where we are today.

So, the risk to New York is not that, you know, there`s going to be a union
contract that`s too expensive and that drives the city over the cliff.
It`s what happens if there`s a de-financialization of the U.S. economy.

What if -- you know, a lot of people on the left make arguments that large
parts of finance industry aren`t creating value, and if we had a change in
industry that made banking back to about half the size it is now, about the
role it played in the economy in the 1970s, that would be a very negative
thing for the economy, specifically of New York City. And the question is,
is the city prepared for industrial change like that, in the way Detroit
was not, as its manufacturing industry fell apart?

KLEIN: But -- and this goes to, I think, an underlying problem I have in a
lot of these discussions, which is that there are real economic challenges
that these countries, that these cities face, but what ends up happening in
the domestic political conversation is they get boiled to whatever the
particular challenge people want to talk about happens to be.

So when we`re talking about Greece, it was jammed into this kind of deficit
conversation that you had to -- the only way to not become Greece was to
sort of move on the Ryan budget and the plans there to block Medicaid and
voucherize Medicare. That`s the only part that got talked about. Nobody
sort of talked about the monetary policy, all the other things and currency
union. And that was really what was driving Greece and it become a very
deep competitive economy, that was trapped in a very, very dysfunctional
political situation.

And here too, you know, Michael Bloomberg, I think, has actually been very
effective trying to diversified parts of the New York economy seen it very
clearly. He`s argued before, something of a luxury good. He has tried to
increase tourism. But that`s kind of a harder conversation, so you get
this kind of very boiled down version of Detroit, which is simply like a
largely wrong story that`s meant to back up a very, very narrow, in this
case political agenda.

BARRO: I think that`s right. Although, I note in the mayor`s remarks
today, he did. There were two things he said were important for the next
mayor. One was to make sure the next employee contracts that get signed
control pension health care costs. And the other thing he brought up was
what you`re saying. About the need to diversify the city`s economy. He
has worked on that, it`s been challenging in New York. The city has been
expensive. And it has been so focused on finance.

So, I think it`s good to draw people`s attention to the need to do that.
And the reason people talk about cases like Detroit is that they are big
and scary and they get people to pay attention. So, I think you are right
that it can be a distraction. But I think it also it draws people`s
attention to these issues.

If you look at New York, we have gone from spending about $500 million a
year on pension contributions in 2000 to spending $8.5 billion a year now,
17 times increase. The city spends about a fifth of its budget on health
care and pension costs. And so, the likely negative outcome from that is
not a Detroit style outcome. But the likely negative outcome is that it
means the city foregoes, infrastructure investments or can`t reduce class
sizes or any number of other policy and issues as the people might want to
undertake, but instead get swallowed up by that. And, you know, until we
started having the pension crisis in 2009 when it was really squeezing
state budgets, these costs were rising on auto pilot and people weren`t
paying attention to those.

So, I think it`s good people are paying attention. They shouldn`t be
afraid of literal municipal insolvency like what happened in Detroit
because that`s rare. But I think that a Detroit discussion can be
productive to the extent it gets people to pay attention at all.

KLEIN: And then I do think that one of the things that gets people to pay
attention is (INAUDIBLE) for Detroit, is at the base of this, this is all
unsustainable without growth and continuing growth.

John Barro from "Business Insider," thank you for being here tonight.

BARRO: Thanks, Ezra.

KLEIN: And we will be right back with click three.

(COMMERCIAL BREAK)

KLEIN: How does this country actually get things done when both parties
are at such perpetual odds? You have to go around Congress, not through
it. I will explain coming up.

But first, I want to share the three awesomist things on the internet
today. We begin with revenge (INAUDIBLE), in this case Colbert. Last
night was supposed to be the much hyped appearance on the band, Daft Punk
on Stephen Colbert`s show. But plans to hear their song this summer get
lucky, were reported when the band no show. Not one to be termed, Colbert
improvised and held a dance party of his own.

(VIDEO CLIP PLAYING)

KLEIN: Colbert lip synced and gyrated his way through the hit song with
help from some celebrity friends, but the back story here is juicy.
Apparently, MTV is booked Daft Punk for a surprise performance of the
upcoming video music award and MTV brass strong armed Daft Punk off the
Colbert report. And that did not sit well with Steven and as deadline
reports to exact revenge, Colbert spilled and to be surprised on air.

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, HOST, THE COLBERT REPORT: Daft Punk are going to make a
surprise appearance on the MTV video music awards. Spoiler alert, OK?
Don`t tell anybody. Because fun fact, no one told me until 2:00 yesterday.

(END VIDEO CLIP)

KLEIN: Note to television executives, do not cross Colbert. He will spoil
your secrets and go right back to partying with Matt Damon.

The second awesomist thing on the internet today, a true fish out of water
fell for shark enthusiast. This is the most wonderful time of the year,
it`s shark week. And whether it`s because of the popular shark themed
entertainment like Sharknado or nostalgic shark memories of shark youth.
Shark youth has never been more popular.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Like every week like a shark week.

(END VIDEO CLIP)

KLEIN: Which explains why these photos were a viral hit today. The Web
Site (INAUDIBLE) posted some snapshots at a real and yes, deceased shark on
a queens bound train in New York. No one knows how it got there or where
it came from. But its presence was enough to lifted a statement from Shark
week creator for Discovery channel.

Shark week is about conservation. So, it deeply saddens us if someone
would think this is funny or in any way connected to our celebration of
sharks. I believe some people think the way to celebrate sharks is to post
it with a cigarette, a red bull and a metro card. Those of you offset by
these photos, we apologize and we offer this as a pallet cleanser, the
return of shark cat on a Rumba.

And the third awesomist, but also the saddest thing on the Internet today,
ground control to major tear jerker. It`s been one year since Mars Rover
curiosity touched down on the red planet. In a year, it spent 208 million
miles from home. Curiosity spent the time analyzing soil samples while
making noises like this.

(AUDIO CLIP PLAYING)

KLEIN: That`s what science sounds like on Mars. It`s not the prettiest
sound in the world, but for Curiosity`s first birthday on Mars, away from
home, the NASA team decided to give the little Rover a special treat.
Curiosity`s vibrations were strung together so they formed the notes to
happy birthday and the results are both touching and heartbreaking.

(AUDIO CLIP PLAYING)

KLEIN: Lonely Mars rover, you are going to make me cry, spending your
birthday by yourself and singing to an empty planet. But don`t worry,
Curiosity, we here on earth are celebrating with you. And I will eat
enough for both of us. You can find all the links for the night`s click on
our Web site allinwithchris.com. And we will be right back.

(COMMERCIAL BREAK)

KLEIN: This is gridlock. You`re looking at gridlock, a traffic jam.
There are too many cars and too many trucks on the streets, and so nothing
is moving, or what is moving is moving very slowly.

This is a metaphor we have chosen for when Republicans and Democrats in
Congress can`t come to an agreement and so Congress ends up doing nothing,
gridlock we call it. And every time we call it that we think of a traffic
jam where nothing moves. And this is a mistake. It is a metaphor that
leaves us arrive every time. When Congress can`t get anything done, things
do happen. It just means that they happen outside of Congress. They go
down the city street.

Let me give you an example. No Child Left Behind. The big school formed
bill passed by President George W. Bush in support of conservative
Republicans like John Boehner and the whole Democrats like senator Ted
Kennedy and Congressman George Miller, No Child Left Behind.

No Child Left Behind technically expired in 2007. It is a zombie bill.
But no one did anything about it. They didn`t re-authorized it or overhaul
it. They just kept appropriating money. And so, the outdated provisions
of this out of touch bill are beginning to strangle the education system.
Says that 100 percent of school districts need to meet tough proficiency
goals in reading and math in 2014 or they lose tons of money and that goal
will not to be met. We have known that for years that the school districts
will not hit those targets. And that means they are going to lose tons of
money. Those kids will lose tons of money. And so, we needed to do
something, but, you know, Congress.

So, the Obama administration began giving out waivers, just direct waivers
telling almost 40 states they`re letting them out of No Child Left Behind
as long as they agree to meet other quality targets. And today, they took
another step. And after rejecting California`s request for a waiver, they
said yes to eight individual school districts in California, Sacramento,
Fresno, Long Beach, L.A., Oakland, san Francisco, Sanger and Santa Ana.
That`s the first time it ever happened.

With Congress doing nothing, this governing by waiver is becoming common.
The Obama administration decided to delay parts of Obama care for a year
because they didn`t think they would worth to implement this year. After
the dream act failed in Congress, the Obama administration decided to stop
prosecuting undocumented immigrants who fit dreamer characteristics, say
basically just implemented the law by executive peer.

To Republicans in congress, this is lawlessness. This is the executive
branch stepping out of its bounds and around Congress. But the Democrats
in Congress, it`s the only way for the executive branch to govern amidst
the Republican party that refuses to work with this White House.

But this is why congressional gridlock is not like traffic gridlock.
Things move, laws get made. They just are not made in the art of the
government that supposed to be making them.

Joining me now is Mattie Duppler, director of budget regulatory policy for
Americans and for Tax Reforms and Norm Ornstein, resident scholar at the
American Enterprise Institute co-author of the book, "the broken branch,
how Congress is failing America, and how to get it back on track"

Thank you both for being here.

MATTIE DUPPLER, AMERICANS FOR TAX REFORMS: Thanks.

KLEIN: And Mattie, I want to start with you, what do you think of these
waivers? I imagine you`re not a huge fan of them.

DUPPLER: Well, it is interesting you pointed out kind of the other example
just as you mentioned, Republicans are pointing to. This unilateral action
by the executive branch and we are thinking on the right that this is
problematic. And I think that the same thing was happening on the left
during the George W. Bush years and saying anything that George W. Bush did
without congressional approval was also the same kind of over rage in the
executive branch.

So, it is problematic coming from Obama now. You mentioned dreamers, you
mentioned Obama care. These are all agenda items that the president
decided to execute because he didn`t want to involve congress. Because he
couldn`t necessarily promote his agenda through Congress. That`s not the
way we make laws in this country. And we can`t pretend just because the
president wants to do something, that another branch of government doesn`t
that gives him the authority to do so.

KLEIN: SO Norm, you are a congressional scholar. You have studied
relationships between the executive branch and congress for a long time.
Is what we are seeing here in terms of this government by way of
unprecedented or is it a more normal thing?

NORM ORNSTEIN, RESIDENT SCHOLAR, THE AMERICAN ENTERPRISE INSTITUTE: It`s
more normal, although taken to a different level. I mean, I get very
amused when I see the back and forth on this because I remember "Wall
Street Journal" editorials back during the Reagan and Bush years which
basically made it clear that there was no article I in the constitution.
It all started with the president. Somehow, this has been lost in history.
And now, you`re getting indignation over things that they had deeply
supported in the past.

I don`t like to see -- I didn`t like to see in the Bush years all kinds of
signing statements that basically said I have signed this law, but I`m not
going to implement major parts of it. And I think presidents can go too
far on that front.

But in fact, the larger point here is, Congress is willfully not acting,
they are trying to sabotage existing laws. And there`s not a whole lot a
president can do except to issue waivers. In many cases in the past,
conservatives have supported waivers when it gives power to the states and
governors to do things. And that`s partly what we are seeing here.

KLEIN: But I do think, Mattie, one of the interesting things here, is not
that Congress is choosing not to act. The way you said and the way Norm,
you actually said is true is that Congress is kind of deciding not to act,
but they`re not doing that. They`re not being able to make any decision at
all because there`s, of course, a flip side, right? If Republicans
controlled congress, they could take away authority on these things. I
mean, congress would clearly have the power to do that. But, the Obama
administration`s actions are being protected by Democrats in Congress who
run the Senate and obviously, a tiny bit of power in the house.

So, I mean, you do have that piece as well. Like this is this collision
between of where neither sides can actually stop the Obama administration
or help them.

DUPPLER: And this is way to put it. And Norm alluded to, both sides are
responsible for us continuing to cede power to the president. But I think
Obama care and No Child Left Behind are instructive in this instance. You
know, No Child Left Behind, it`s not just that Congress is unwilling to
act. The House has passed a bill that would reform No Child Left Behind, a
holistic package, excuse me, in July. The Senate hasn`t acted on anything.
They haven`t even marked up anything in committee. So, that shows you what
side is moving on things.

The same thing with Obama care. You know, the idea that we can have an
employer mandate waved but not the individual side of things is ludicrous.
To those of us who think that, well, the law is going to work. You should
have the entire law go into effect rather than picking and chooses where
you think it might be successful. But again that motion hasn`t been taken
up by the Senate, by the Democrat control Senate. Even though the
Republicans, one of the last thing they did when they were in town was pass
a waiver for American families as well.

ORNSTEIN: You know, I think we always going to find with united government
a back and forth and give and take. And even with united government at
times, we have when there were Democratic presidents, Democratic
congresses, assert their authority.

But usually, they work things out on most issues and they find through give
and take. This is different. This is different than what we have seen
before. This is an all out war. We have seen def-con I raised way too
many times. And we are heading towards something that is now gridlock, but
much more like a massive pile up 405.

KLEIN: I want to talk to you about the massive pileup when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: I think the received wisdom that many 95s with a
disaster. I think is completely wrong. I think it was important that
Republicans stood for principle and it actually led to some serious
solutions to the fiscal and economic challenges facing this country.

(END VIDEO CLIP)

KLEIN: That was Republican senator, Ted Cruz, speaking last week at a
Heritage Foundation event. And the non-disaster he`s referring to there is
a 1995 government shutdown. Ted Cruz is trying to convince conservatives
to forget the more unpleasant things he might remember about that shutdown
and its ramifications because he thinks the key to convincing Democrats to
just throw out the affordable care act. The signature achievement of the
Obama era, is a Republican party ready to shut down over it.

And what Ted Cruz has been joined on his quest to defund Obama care at any
cost by Republican luminaries like Rand Paul n Kentucky and Mike Lee of
Utah, the Republican party is by no means united behind him. Tom Coburn
said it won`t work. Richard Burke called it the dumbest idea he had heard
of. And now, the party`s most recent standard bearer has come out with
some words of caution of his own.

Mitt Romney telling a room full of Republicans yesterday quote "I badly
want Obama care to go away and stripping it of funds has appeal. But we
need to exercise great care about any talk of shutting down the government.
What would come next when soldiers aren`t paid and seniors fear for their
Medicare and Social Security and when the FBI is off duty. I`m afraid that
in the final analysis of Obama care would get its funding, our party would
suffer in the next election and the people of the nation would not be
happy."

Those are all excellent questions as we continue our conversation about
governing through gridlock.

Back with us at the table Mattie Duppler from Americans for Tax Reform and
Norm Ornstein of the American Enterprise Institute.

And this is to me the other side of this gridlock, right? There`s a bunch
of stuff, it`s not that nothing happens, some stuff happens, and then some
stuff when it doesn`t happen, like funding the government or raising the
debt ceiling has a capacity to cause widespread disruption and even chaos
in the American economy or to services Americans depend on. And that too
has become, I think, kind of a bit of a sickness here. It has become a
belief, instead of going to the table and ironing out differences and
pieces of legislation, and what gets you to the other end, is already to
get something done. It was a kind of hostage taking mentality that`s
coming about.

DUPPLER: Yes. And I`m all for principle of fight. That`s why I live in
Washington. I love that kind of thing. But, the problem with the
government shut down fight is Republicans are the party of less government.
So, if the government stops doing things, people who want government to do
things are automatically going to get upset.

You know, I live in D.C. They won`t look after parking, so I`m excited
about that. I can park wherever I want. But you know, there are real
effect that people feel and that they hold political parties accountable
for.

The other thing with the government shutdown thing, you know, Senator Lee
is talking about the resolution, the funding of the government, but this is
going to run up against, of course, another debt limit debate. And that
takes on a whole other character, when we talk about that. But to the
American public, people who aren`t sitting in Washington, D.C., watching
this, you know, every second as it goes by, those two mean the same thing,
even though there`s two distinctly different battles.

So, for Republicans and Democrats who are trying to iron out these problems
here in Washington, they are going to be thinking ten steps ahead, rather
than this one which is kind of the linear thinking on the defund Obama care
on the CR strategy.

KLEIN: And Norm, I think that the light this puts away for debate is that
it does seem to me that the approach to negotiating and the approach to
legislating has changed. That one of the reason you see the executive
branch and also for that matter, the Federal Reserve and some of their
agencies is taking more power as things don`t get done in Washington.
There`s become a kind of giving up, a belief that if you have a party, and
the Republican party now that is willing to put the debt limit in jeopardy,
there is one to possibly shut down the government, that there aren`t deals
to be made there, at a certain time it`s time to find ways to govern.

ORNSTEIN: And that is a sad phenomenon, because you don`t want those
decisions made by others outside of the elected branches doing give and
take. What I find so astonishing about this is you have a mind-set that is
the basic functions of government are not something that we have
responsibility for. It`s something we are going to give to you in return
for your giving up something that is a law that has been passed. We are
trying to sabotage it in other ways, but by God, we are going to hold that
hostage. We are going to hold the full faith and credit of the United
Stage hostage. We have had games played with the debt limit before. But
before this era, everyone knew they were going to make it happen, because
it was irresponsible not to.

What we have now is leaders like John Boehner who go from saying, we can`t
let that happen. That would be crazy and terrible for the United States.
Now, bullied by his own caucus and cowed into submission saying, well, I`ll
tell you what, we`re going to use the Boehner rule. We`ll increase the
debt limit if you do another set of hundreds of billions of dollars in
additional cuts beyond what we`ve already done. This is not like governing
we`ve seen before, and it`s beyond irresponsible.

KLEIN: And quickly, Mattie, in the long run, isn`t the danger here that
Congress and accountable branches and Democratic branches of government
begin to fall in power as opposed to more unaccountable, more executive,
more independent branches.

DUPPLER: I think that`s definitely the worry for folks who are in
Congress. And folks who are observers of what`s going on in Washington
right now. But we have to remember, things like the sequester, where kind
of supposed to embody this idea that we just have an automatic spending cut
because the parties can`t come to an agreement on where we should be having
cuts.

This is the kind of action that should promote that kind of thinking. That
to get lawmakers thinking about prioritizing spending, about thinking what
we actually want government to do. And the problem with the government
shutdown fight, is that you only have one side of each of that argument,
you know, to talk about where spending can be curtailed and where
government can be made more efficient.

KLEIN: Mattie Duppler from Americans for Tax Reform and Norm Ornstein from
the American Enterprise Institute, thank you both for being here tonight.

DUPPLER: Welcome.

KLEIN: That is "ALL IN" for this evening. The Rachel Maddow show begins
now.

Good evening, Rachel.
END


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