updated 8/21/2013 1:30:19 PM ET 2013-08-21T17:30:19

ALL IN with CHRIS HAYES
August 20, 2013

Guests: Evan Smith; Alan Russbridger, Lee Saunders, Dean Baker


CHRIS HAYES, MSNBC HOST: Good evening from New York. I am Chris
Hayes. Tonight on ALL IN, it is Ted Cruz`s coming out party, and I`ll tell
you why in a minute. He`s not just another wackadoo. We`ll go live to
Dallas, Texas, where Ted Cruz is about to speak in just a moment. You see
the big defund Obamacare banner which lets you know what the event is going
to be like.

Also, tonight the terrifying prospect that one result of the
bankruptcy of the city of Detroit could be the thousands of potential
personal bankruptcies caused by the slashing of retirees` pensions. A full
discussion on that is coming up.

All that plus, I am absolutely geeking out a little bit over what I
think is the coolest car ever. The Tesla. And I will tell you just why
it`s so cool but also why it`s so important.

But tonight, we begin with a man who I believe is the most dangerous
politician on the American right. In October 2007, I sat in the media
gallery of the United States Supreme Court and watched the solicitor
general of Texas argue on behalf of the state that he should have the
ability to put to death a Mexican national, Jose (INAUDIBLE), who had been
convicted of raping and murdering two teenage girls in Houston.

He won that argument and he was executed by Texas on August 5th, 2008,
despite the objections of the United Nations and the international court of
justice. At the time, I had no idea who this man arguing on behalf of
Texas was. But all I could think was holy crap, this guy is good.

It was one of his nine times arguing before the Supreme Court and he
was witty, incredibly fast on his feet and clearly had a brilliant legal
mind. It is, to this day, one of the most impressive displays I have ever
seen before the court and I have had the good fortune to spend a lot of
time there.

So you can imagine my horror in 2012 when I tuned into the Texas
Senate race. I hadn`t been paying much attention to. And realized that
lieutenant governor David Dewhurst, the Republican establishment candidate,
was being prepared by a tea party candidate who was the same guy I saw kick
ass in the Supreme Court in 2007.

I thought that night, night I made that connection, oh, this is
trouble. And trouble that man has been. Trouble in every direction as he
vies to be the singular voice of the right wing grassroots and as he has
very quickly assumed a leadership role in movement. He is a man who
combines the intellectual credentials and pedigree of Barack Obama, with
the raw right wing populist appeal of Sarah Palin. His full name is Rafael
Edward Cruz and he was born in Calgary, Alberta, in Canada. As we learn
this week when he released his birth certificate to the Dallas morning
news. He`s only 42-years-old and he is by virtue of being born in Canada
to an American mother, likely a dual citizen of Canada and the United
States. Something the senator from Texas seemed shocked and upset by.

Late last night in a response to the story revealing the likelihood of
him having dual citizenship, he said quote "I will renounce any Canadian
citizenship. Nothing against Canada, but I`m an American by birth. And as
a U.S. senator, I believe I should be only an American."

Now, the interest in Senator Cruz`s citizenship comes for only one
reason because the right wing of the Republican party is increasingly
betting on him as their presidential candidate. And tonight, he takes one
step closer to that future, coming before the people of Texas to stake his
claim as the leader of the national political scene`s most reactionary
elements.

Joining me now is NBC News reporter Kasie Hunt who is live at the
heritage action Defund Obama care town hall tour in Dallas.

Kasie, the morning note this morning NBC news put out was talking
about the stuntness of the Defund Obama care movement. This essentially is
not going to get anywhere in Congress. My question is, is this a vehicle
for Ted Cruz? Or is this actually a serious effort?

KASIE HUNT, NBC NEWS REPORTER: This is a way for Ted Cruz to speak
directly to his base. He is carving out this niche as the guy who is
willing to take these stands even if they`re unpopular with moderates in
his party., you know. Senators like senator minority leader Mitch
McConnell is even having trouble with the way Cruz is positioning himself,
but himself, excuse me.

But you were talking about, you know, whether or not he is a citizen
and he actually addressed that at some length with reporters just before
this meeting. And, you know, he didn`t call himself a natural born
citizen. He said "I have been an American since birth" and he refused to
speculate about whether or not he would be eligible to run for president.
He said he was going to leave that to legal scholars.

HAYES: You know, it`s interesting that Ted Cruz, this has come to
sort of bite him back that all of the worry about birth certificates and so
forth have come back to bite Ted Cruz. That the reason being that
basically that all this noise had been made over Barack Obama`s birth
certificate, and so now Ted Cruz is forced to litigate this, in my mind,
ludicrous absurd issue precisely because there was such a long sustained
movement on the American right to question Barack Obama`s birth certificate
and whether he, himself, could actually be president of the United States.

HUNT: A couple things on that. Cruz was asked, also, if there are
any similarities between his situation and questions about his citizenship,
and the questions that President Obama faced that eventually led him to
release his long-form birth certificate. Cruz also refused to speculate on
that. So he wouldn`t, you know, distance himself from it. He also
wouldn`t, you know, draw any distinct parallels.

The other thing I would point out, I was in Iowa a couple weeks ago
with activists at Bob Vander Platt`s family leader program. And it was
something that I heard murmurings about. That activists there in Iowa were
in fact concerned about whether or not he was a natural-born citizen and
could, therefore, be eligible.

So, it was clear to me at that point that those questions were
simmering underneath the surface enough that at some point Cruz was going
to have to address them. And thanks to the "Dallas Morning News" it
happened sooner rather than later.

HAYES: Can you answer this for me, Kasie. Who shows up on a
Wednesday night, or Tuesday night at 7:00 p.m. central time for a Defund
Obama care town hall? Who are the folks in that room that Ted Cruz is
going to be speaking to?

HUNT: They are all supporters of the Heritage Foundation and Heritage
Action. And of course, Heritage Action has a long history of being a
really powerful group that actually does hold a lot of sway over
Republicans, especially in the House of Representatives.

So the people have talked to here so far are really, you know, they
are ardently against Obama care, as they call it, the president`s health
care law. They are huge fans of Ted Cruz. Most of the people that, you
know, I spoke to who are trickling their way in are here particularly to
see him. And the Heritage Foundation is claiming that this is an oversold
crowd. We will see. They are still trickling into the ballroom behind me.
but there were pretty long lines to get in as I was walking over here.

This event was supposed to have started a few minutes ago. We are
running a little bit late. So, we will see if they fill up the room and
fill up the standing room as they promised.

HAYES: NBC news reporter Kasie Hunt. Thank you so much.

HUNT: Thanks, Chris.

HAYES: Joining me now is Evan Smith, CEO and editor in-chief of the
"Texas Tribune."

Evan, there is polling that I found really interesting. This is
Texans saying they favor Ted Cruz over Rick Perry for president in a GOP
primary by quite a good margin, 18 months ago. I don`t know how much name
recognition Ted Cruz has. It speaks to how successful he has been in
cultivating name recognition and kind of star aura around himself in just
his very young Senate career.

EVAN SMITH, CEO/EDITOR IN-CHIEF, TEXAS TRIBUNE: Right. 2 1/2 times
the response that we saw for Perry in that poll. Look, the reality is he
is tapping into a very angry base of Republicans, tea party Republicans.
The most conservative element of what is a very conservative Republican
party already in Texas. He is their folk hero in the same way, last time
you and I talked, Wendy Davis has emerged as the Democrats` folk hero in
Texas. And he is voicing their concerns, their antipathy for the
president. Their belief that Obama care is a fraud and is unworkable and
should be defunded immediately.

I`m with the whole conversation about it almost doesn`t make a
difference if the effort works. It`s, he`s speaking to the concerns and
the fears of people out there, and ultimately it helps build his brand and
ultimately stokes those flames and the fight goes on. That the outcome is
less important than the fight, itself.

HAYES: Well, but the outcome will matter because the outcome will
matter insofar as whether or not they can force this on to the agenda, have
some kind of thread of default or shut down the government which will have
real consequence in people`s lives. Also, real political costs for the
Republican party.

And what I think is interesting here is that Ted Cruz seems to me
uniquely positioned to essentially pull off what is an increasingly
difficult thing for any Republican standard bearer to do, which is to tell
the base what they want to hear in the most reactionary terms, in the most
red meat terms possible, but to be able to have behind-the-door
conversations with essentially the mockers and power brokers the Republican
party, and says, hey, look, I`m Harvard law, I know what the deal is, I
know how this game is played, and essentially soothe them that he is not
some yahoo. And pulling off that very complicated dance, it seems to me
Ted Cruz is better suited for than almost anyone.

SMITH: Well also, if he loses, he wins. I think that by waging the
battle even if he comes up short, the people in his own party who oppose
him become part of the group of enemies he is fighting against.

He needs to position himself in the 2016 primary. He needs to
position himself period, not just against the Democrats but against the
apostates in his own party. And if he`s not able to generate the support
for this whole litany of things beginning with defunding Obama care, that`s
OK because he now has them to run against as well.

You are correct, he is well positioned to play both insider and
outsider. I wouldn`t expect to see him in a Harvard sweatshirt campaigning
on the campaign trail. It doesn`t exactly help him to be part of the
effete, elite, east coast establishment that has really become his best
punching bag in this whole fight.

HAYES: I want to play you a bit of sound of him talking about
speaking on the Senate floor. The reason I want to play it for you to set
it up is he has not gone by the normal young senator, deferential, quiet
kind of approach that a lot of senators do, particularly, star senators
when they come into the United States Senate. Think about Hillary Clinton,
even Barack Obama in the beginning. He`s been very loud, very outspoken,
and it is very easy to find people in Washington in the Republican party
who cannot stand the guy.

Here he is essentially saying why that is take a listen.

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: You may not know that, but that was
actually my first time ever to speak on the floor of the Senate. There is
a tradition in the Senate that junior senators should be seen and not
heard. I haven`t entirely managed to comply with that.

(END VIDEO CLIP)

HAYES: Does this guy have as many enemies in Texas as he already done
in D.C.?

SMITH: Most definitely he does not, and the reason he does not is
because the same people he`s fighting against, the people back in Texas,
don`t like either. He is an emblem of the anger of the state of Texas
institutionally against the federal government.

What Rick Perry has talked about for the last couple years, Ted Cruz
has now doubled down on that idea. So, every time he runs afoul of Lindsey
Graham or John McCain or Mitch McConnell, he becomes more popular in Texas
as a result of that.

You may think that "The New York Times" and the "Washington Post" and
members of his own party attacking him weaken him in Texas. It is the
thing he feeds off of. It makes him stronger.

HAYES: Princeton, Harvard, and Texas man.

Evan Smith from "Texas Tribune." Thank you so much.

SMITH: Thanks, Chris.

HAYES: Top secret government officials show up at a newspaper and
supervise the destruction of hard drives containing highly newsworthy
documents. You have had your fun, one official tells the paper`s editor,
now we want the stuff back. That true story is coming up.

(COMMERCIAL BREAK)

HAYES: Going to introduce you to one of the greatest inventions of
our time. OK. Maybe not the greatest, but it`s something to be super
excited about. That`s coming up.

(COMMERCIAL BREAK)

HAYES: David Miranda probably never thought he would be the center of
an increasingly high-stakes, international, political, intelligence and
media battle over the world`s most closely held secrets.

Well, he now finds himself in precisely that position. Miranda is a
Brazilian national, partner of "the Guardian`s" Glenn Greenwald, the man
who has been writing blockbuster stories based on Edward Snowden`s leaked
NSA documents.

This past Sunday, Miranda was detained by UK authorities in Heathrow
airport while returning from a trip in Berlin where he met up with
Greenwald`s journalistic collaborator, the filmmaker, Laura Poitras.
Miranda had his laptop confiscated by the authorities, along with an
additional hard drive, two memory sticks, a mobile phone, a smart watch and
a video game console. He was held and interrogated for nine hours, under
schedule seven hours, I mean, British anti- terrorism called the terrorism
act of 2000. Asked about his association with Greenwald and "the
Guardian`s" reporting.

Miranda`s lawyers are threatening legal action over what they and
others are calling his, quote, "unlawful detention." British government
defended its decision to detain Miranda in a statement today saying in part
that it was their right to stop anyone suspected of carrying quote "highly
sensitive stolen information that would help terrorism."

When U.S. officials were asked about the incident, they said they got
a heads-up from one employees were going to detain Miranda, but instead,
they had nothing to do with it saying "this was a decision made by the
British government without the government and not the request of the United
States government."

In response to Glenn Greenwald`s partner being detained, the editor of
"the Guardian," Alan Russbridger, recounted yesterday a series of
absolutely jaw dropping top-secret conversations with the highest level of
UK intelligence officials. The gist of these talks being hand over the
Snowden material, the hard drives, the agency believed contained leaked
files or destroy it or we will stop you from publishing it. UK`s officials
going on to say things ominous like "you`ve had your fun. Now we want the
stuff back" and "you`ve had your debate. There`s no need to write
anymore."

What you are looking at is a Mac book from "the Guardian the" that
held information from Edward Snowden. That was one of several hard drives
smashed to bits at the behalves of UK government.

Joining me Alan Russbridger, editor in-chief of "the guardian"
newspaper.

Alan, you write in the piece in the "the Guardian" about being
contacted by a representative of the UK government who claimed to speak to
the prime minister over two months ago. And I wonder was this before "the
Guardian" had published any of the Edward Snowden documents?

ALAN RUSSBRIDGER, EDITOR IN-CHIEF, THE GUARDIAN: No, we had published
some of the documents so this was, I guess, some weeks into our handling of
this material.

HAYES: Had you had any conversations with the UK government prior to
publishing? I know in some similar situations in the U.S., in regards to
the NSA and Wikileaks and "The New York Times" had extended negotiations
with the Bush administration. Had you had any interface with the UK
government before you published the first Snowden document?

RUSSBRIDGER: We have been putting matters to both the U.S. and the UK
governments and allowing them time to respond and make representations
before most of the stories that we published.

HAYES: Were you surprised by what you refer to as the steely tone and
increasing escalation of what can only be interpreted as threats from the
UK government over publishing what you are publishing?

RUSSBRIDGER: Well, to begin with, the discussions were cordial and
didn`t feel threatening, but there came a point about just over a month ago
where the tone changed and there was an explicit threat to use the law if
we didn`t either return the material that we had or destroy it.

HAYES: And so how did you respond to that?

RUSSBRIDGER: Well, it may be difficult for American viewers to
understand the British context and this is partly why I published this
piece yesterday. So you got a context in which there is no first amendment
in the UK and there`s no bar against prior restraint. The restraining of
newspapers or news organizations to stop them publishing material in
advance of publication.

So, in a world in which I explain to the British government that we
had this material already in America and Glenn Greenwald has it in Brazil,
it seemed to me to misunderstand the nature of digital communications to be
destroying a hard disk in London. But as they were adamant they would go
to law, I thought it was simpler to get on with the reporting from America
and destroy the copies that we had in London.

HAYES: Which means agents from the UK government came to "the
Guardian`s" offices with, what, sledgehammers? With -- I mean, honestly,
how did it -- like, physically, how did it go down? There was a hard drive
on the floor and you watched as agents of the government battered the
thing?

RUSSBRIDGER: Well, this might seem a nice distinction, but I was not
going to hand these, this material to the government in any way. So I said
we would destroy it, but if they wanted to supervise the destruction, then
they could. So they sent along two technicians from GCHQ. That`s the
equivalent of the NSA. And they advised on what you have to do in order to
destroy a machine so that it is of no use to anybody else and nothing can
be retrieved from it, which is a bit more complicated than I had imagined.

HAYES: So "the Guardian" employee went through the process of
smashing to bits, burning the un-recognition, whatever it is, while two
agents of essentially the UK`s version of the NSA watched over and made
sure the process was being done.

All the while, a copy clearly of these files exist, I don`t know
where, in Brazil, the U.S., somewhere, and you are redoubling your efforts.
You are, intend to publish, to continue publishing stories from this trove
of documents?

RUSSBRIDGER: Well, that, to me, has been the overriding priority.
That there is material there which I think deserves to be aired and which
is of some public importance. And that`s why I didn`t want to get caught
into a situation in which effectively a judge would have control of the
Snowden material.

HAYES: Are you going to find yourself -- are you going to find
yourself before a judge? Are you going to find yourself brought before a
court, indicted in some form if you continue to do this? Do you have any
fear about that?

RUSSBRIDGER: Well, I don`t believe that that will happen, and if you
listen to the attorney general Holder, he`s made it explicit that he
doesn`t intend to prosecute journalists for doing journalistic business in
the United States. So, I believe that protections are in the 1st amendment
and absence of prior restraint in America are as high as anywhere in the
world, and I don`t believe that journalists are going to be at risk for
doing journalism in the states.

HAYES: Alan Russbridger from "the Guardian," thank you for your time.

All right. I`m going to completely geek out over the new Tesla model
"s," which is literally the best car ever made, ever. That`s coming up
next.

(COMMERCIAL BREAK)

HAYES: Last night, the greatest press release in the history of press
releases was posted and unlike basically every other press release ever
posted, it quickly tore through social media and elicited excited oohs and
aahs and whoas including I will admit from yours truly.

It comes from the electric car company, Tesla motors and the headline
really says it all. Tesla Model S achieves best safety rating of any car
ever tested.

Now, before getting into the content of this press release, keep in
mind the context here. The model "S" is the first car from the first big
new U.S. automaker in decades. And it`s not just the first car company,
it`s a car company founded to make good on a century-old dream of a
consumer mass-produced electric car. It is the ultimate David vs. Goliath
story and it is a company that many thought for years was a very expensive
joke.

But then, Tesla after losing lots of money and getting a government
loan, they actually made a car, a real tangible electric vehicle that could
be driven and poked and prodded and tested and something incredible
happened. It turned out the car was awesome.

If you`re skeptical, look no further than the independent review from
"Consumer Reports." The model "S" earned the magazine`s top test score and
plenty of accolades.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This car performed better than any other car we
have tested.

UNIDENTIFIED MALE: It just outperformed just about everything. It`s
quick, it handles well, rides well, it`s quiet. Super quiet and something
ere and quite about it.

(END VIDEO CLIP)

HAYES: Stealth and downright cinematic to boot. It`s what Marty
McFly might have bought back in place of his Deloreon in "back to the
future."

Now, I assure you, this is not a commercial for Tesla, but love for
this car goes deep. Even the government guys who conduct crash tests
gushed about it. And that was the subject of the press release the company
posted last night.

After getting raves from "Consumer Reports" and auto heads, it was
time for safety regulators to weigh in. Lo and behold, their definitive
conclusion is this thing is the safest car they have ever tested. The
national highway traffic safety administration gave the model "S" the
highest rating it`s ever given because it can take a hit like no other.

The model "s" earning five out of five stars in every category. And
get this, even got an overall score above five stars, a total of 5.4, an
"a"-plus, plus.

So, why is this car so safe? Well, mainly because it is electric.
Tesla explains the model "S" has advantage in the front of not having a
large gasoline engine block creating a crumple zone to absorb a high-speed
impact. The motor is only about a foot in diameter and motorists mounted
close to the rear axle. And the front section that would normally contain
a gasoline engine is used for a second trunk. All that doesn`t mean much
to you, consider this.

Tesla says the roof of its model "S" is so strong that it broke the
testing machine that was used by government regulators. As you can
imagine, all this awesomeness comes at a price, a steep one. About 70
grand for starters which is out of reach for your average consumer. But,
it`s a small step toward a zero emissions future, and that`s why this is a
big deal. Because if we`re going to avoid a prolonged era of climate
change-induced misery, we`re going to need a whole lot of things. We`re
going to need grassroots movements, huge political changes and a whole
variety of massive engineering innovations in about a dozen sectors that
totally and completely transform our industrial system and how it is
powered.

This is the frontier of that. We desperately need American capitalism
to stop spending its time and resources and ingenuity and human capital
figuring out how to make money with glorified bets in the Wall Street
casino, or how to make money by squeezing down prices of consumer goods by
tapping ever cheaper labor market and pushing down service sector jobs and
wages and instead doing what American capitalism does at its best, build a
better mouse trap, take an idea, take some capital, take some risk and try
to build something new and awesome and world changing. We need that
everywhere. The Tesla model "S," the best car ever made is just the
beginning. But, think about what might be coming next. We`ll be right
back with #Click3.

(COMMERCIAL BREAK)

HAYES: Imagine working hard your entire career for a pension you plan
to live on in your old age and then the city that`s supposed to provide
that pension goes bankrupt. It`s happening in Detroit and the fate of
those people. Their story is coming up.

But, first I want to share the three awesomest things on the internet
today. We begin with a microblog`s twist on one of the summer`s most
shared photo trends. Behold the hotdog legs tumbler. A site that asks
you, the viewing public, to determine whether you`re looking at appeal to
be a selfie taken on the beach or two frankfurters stacked up like a pair
of legs.

Some are calling it the tumbler of the summer. Others are less
impress calling it a disturbing example of tumblers body image issues.
Either way, the man is trying to co-opt the trend. Fat cat hot dog
conglomerates are now co-opting the guessing game, meaning the hotdog legs
tumbler may have jumped the process needs shark. As for this broadcaster,
when it comes to legs and hotdogs, I always prefer hotdogs that have legs.

The second awesomest thing on the internet today, a video going viral
on Youtube, which features the gospel choir of an unidentified church
giving the congregations of very healthy advice in this age of social
media.

(VIDEO CLIP)

HAYES: Yes, keep your business off of Facebook. It`s advice we could
all stand to listen to, some of us more than others. And, the third
awesomest thing on the internet today is a basketball twofer, beginning in
an airport where Denver Nuggets guard Nate Robinson is dribbling and
everyone else is traveling.

Nate Robinson`s Instagram account proves a true baller dribbles
wherever he goes, no matter how indifferent the defenders are. Sadly, we
never see Nate get to the rim, which is not true of this backyard surface
hot on Youtube over 800,000 people have watched the video, crazy 11 man
pool dunk, and it is aptly titled.

(VIDEO CLIP)

HAYES: Yes, they let the bro in the banana hammock drop the hammer.
Watching the video again, it is clear the Speedo guy does the heavy
lifting, working the entire perimeter of the pool before the reverse alley-
oop. A summer well spent, gentlemen. #broswithtoomuchtime on their hands.
You can find all the links for tonight`s #Click3 on our website,
allinwithchris.com. We will be right back.

(COMMERCIAL BREAK)

HAYES: Got Wall Street and bondholders on one side, and they are on a
collision course with the unions and 21,000 retired pension holders in
Detroit. Most of them elderly, living modestly. Yesterday, the union and
two public pension funds filed formal objections to Detroit`s bankruptcy
filing ahead of a midnight deadline.

More than 100 formal objections were filed in all, including
handwritten letters from some of those very same retirees. People who did
nothing but work for a living with the promise that they wouldn`t have to
die in poverty. The legal objections run the gamut, claims the proposed
bankruptcy violates both the state and the U.S. constitution, and that the
emergency manager, Kevin Orr, is miscalculating; how much Detroit`s pension
obligations are underfunded.

The average amount pension holders, a.k.a city retirees, are getting,
is $19,000 a year. The amount is higher, $30,000 a year for police and
firefighters but still well bow other major cities. And, from the
individuals who filed formal objections there are examples like Steven
Johnson, a 73-year-old retiree who worked for 22 years as a city boiler
inspector.

"A reduction in my pension will place me and my spouse in hardship
that may result in us filing for bankruptcy." Mary Duggans, a nurse who
worked for the city for 16 years. "I need my pension for basic human
needs. Additionally, I`m 80 years old with age-related medical conditions.
Therefore, I have to pay for medical co-pays as well as for prescribed
medications."

These people, they`re not the ones that bankrupted Detroit. All they
did was work for years for not a ton of money, and a promise they wouldn`t
have to die poor. But, they are the ones who are going to be most at risk
in a bankruptcy proceeding. Today, we learned there`s a lawyer whose sole
job is to make sure all the other lawyers involved in this mess don`t get
paid excessively.

That`s right, a lawyer acting as a fee examiner. Well, that guy is
getting paid $600 an hour, a discount it should be noted from his usual
$675. Meanwhile -- Meantime today, nearby Oakland County unanimously voted
to withhold property tax funding of Detroit`s Crown Jewel Museum if artwork
is going to be sold in any part of the bankruptcy proceeding.

As the largest municipal bankruptcy worked its way through the court,
what you`re seeing is all sectors panicked about who gets hurt and who gets
saved, because it`s going to be completely disconnected from any semblance
of the normal mechanisms of democratic accountability. The bankruptcy
court is not a democracy. It is a dictatorship by design.

Joining me now is Lee Saunders, president of the American Federation
Of State, County And Municipal Employees, the AFSCME, AFL-CIO union. Lee,
you have registered your objections to the bankruptcy proceedings in court.
What are your objections?

LEE SAUNDERS, PRESIDENT OF AFSCME, AFL-CIO UNION: Well, first of all,
we believe that the state and the city are actually acting illegally by
attacking the pensions of retirees, who have worked for 30, 35, 40 years
for the city of Detroit. Pensions are an obligation, and pensions are an
obligation within the state constitution.

We believe that it`s illegal for the city to go after the pensions of
these hardworking Detroit citizens, making $19,000 a year in their pension
-- in their pension payments. We just think that that`s wrong. It`s
illegal. It`s unconstitutional. So, we`ve been in court.

We`re going to remain in court. There will be hearings on this.
There were hearings yesterday. And, then the judge will decide sometime in
October, I believe whether we can stand our ground and say that it`s
unconstitutional to attack the pensions in Detroit.

HAYES: I`ve covered a number of bankruptcy disputes between labor and
bankruptcy court judges in my time as a reporter -- as a labor reporter.
And, let me give you the argument that you always hear from the other side.

Particularly, from the bondholders in this case. Look, any bankrupt
entity has more obligations than it can pay, and those obligations include
in the case of Detroit bondholders, you know, other folks the city has
borrowed money from, and pensioners are just one of those folks.

They need to get in line, and the way a bankruptcy process works is
that everybody is going to get hurt a little bit, because that what is
bankruptcy looks like. What do you say to that argument?

SAUNDERS: I say this. Chris, we`ve been in Detroit. I`ve had staff
in Detroit talking to the retirees -- 20,000 retirees. More than 20,000
will be affected if, in fact, their pensions are attacked in any kind of
way.

Again, our pensioners make on average $19,000 a year. They gave their
lives to public service in that city. Working 30 and 35 years. $19,000 a
year is not a lot of money. I couldn`t live off of that. I don`t believe
you could live off of that. The banks definitely couldn`t live off of
that. The folks in corporations couldn`t live off of that.

Yet we are attacking the people that serve the city well. And, we`ve
been interviewing these retirees across the city. And, you know what they
tell us? They tell us that if their pensions are reduced, they won`t be
able to pay health care. They won`t be able to buy prescriptions. They
won`t be able to put food on the table. They will lose their homes.

This is a real tragic story, and this is America. And, we`ve got to
fight any attempts to attack workers and attack retirees, who have given
their lives. Given their lives to the service and the service of the city
rather than -- rather than attacking them, we`ve got to make sure they can
retire in dignity.

And, that`s what we`re fighting about. That`s what we`re fighting
about. We`re not only fighting about this in Detroit, but let me tell you
something, Chris. If it happens in Detroit, it`s going to happen in other
major urban areas across the country. We`re not saying that there`s not a
crisis, that there`s not an economic crisis in Detroit and other cities
across the country. What we are saying is don`t scapegoat workers. They
have absolutely given their lives to public service.

HAYES: That point, I think, is a really interesting one because,
again, as a labor reporting in the private sector, this happens a fair
amount. Companies will enter into bankruptcy and it`s a very convenient
means of ditching big pension obligations because they can go before a
bankruptcy judge and they can slough off a lot of pension obligations and
pensioners are told, "Well, sorry, tough luck."

And you fear that we could see the pioneering of a process like that
in the city of Detroit, which with this largest bankruptcy in history,
where if this is allowed to happen, this could be something that other
cities use as a model?

SAUNDERS: I don`t think there`s a question about that. That`s why
we`ve got to stop it dead in its tracks in Detroit. Again, I don`t want to
underestimate the fact that Detroit is experiencing economic difficulty.
There`s no question about that.

Manufacturing jobs have been lost in that city based upon corporations
moving their jobs overseas. Government jobs have been lost; but, we have
sacrificed. Public service workers have sacrificed in that city. We`ve
given up wage increases. We`ve had reduced wages. We`ve given up
reductions in benefits and health insurance to keep the city afloat.

We cannot be used as a scapegoat, as I said, for all of Detroit`s
problems, and we`ve got to deal with this, Chris. I believe not only as it
effects Detroit, but the national government. This administration has a
responsibility to deal with the problems that impact on urban centers
across this country. The engines -- The engines of states who are
experiencing financial difficulty.

I`m not saying that we have got to bail everything out. But, if we
can rescue cities and countries in Europe; if we can bail out Wall Street,
which we did; if we can rescue the auto industry, which was the right thing
to do, then I think we`ve got to think about creative measures in which we
can help urban centers across the country who are experiencing financial
difficulty.

HAYES: Do you worry about who will have sufficient power as this
process rolls forward in bankruptcy court to look out for workers? We`re
now -- we`ve now -- we`re now no longer in the world of democratic
politics. We`re in the world of the court of law and you have lawyers that
are making a case about the illegally of this. But, are you worried that,
that -- now that it`s been taken out of the hands of any kind of semblance
of self-government, it`s been put into a bankruptcy court, that --

SAUNDERS: Well, we`ve --

HAYES: Yes, please?

SAUNDERS: I`m sorry. Go ahead. I`m sorry.

HAYES: No. That the most powerful people in that court are going to
be the Wall Street lawyers.

HAYES: Well, I mean, we`ve got to fight it, and we`ve got to make our
voices heard in the city of Detroit and around this country. And, that`s
why we`re organizing our retirees. We`re organizing our communities.
Folks who believe that if you play by the rules every single day, then you
deserve a decent retirement that cannot be attacked. It cannot be reduced.

And, we just got to continue to mobilize our communities. I mean,
we`re going to be in court. We`ll do anything that we possibly can to
protect the rights of our retirees. Those folks who have provided
essential services to the citizens of Detroit.

HAYES: Lee Saunders, I want you to stick around, because if you watch
conservative media, if you read the right wing, it`s the public sector
unions that are bankrupting America, and Detroit is just the beginning,
you`re to blame for all of America`s problems. I want to talk about that
right after this break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CHARLES KRAUTHAMMER, AMERICAN POLITICAL COMMENTATOR: They got used to
the great union benefits, the retirement health care. They got used to all
the other. You know, handouts of money from the government, and when hard
times arrived. It was impossible to in the end do anything because it
would be seen as a cruel reduction of x, y and z.

(END VIDEO CLIP)

HAYES: That`s Charles Krauthammer giving the right wing take on the
bankruptcy in Detroit. Still with me is Lee Saunders from the AFSCME
union, and joining me now is Dean Baker, co-director for the Center for
Economic and Policy Research.

And, Dean, you`ve been seeing this ever since Detroit filed, even
before it filed, that Detroit is everything that`s wrong with liberal
governance. That if you have the cities that are runs by liberals and they
give everything away in handouts and there are public sector unions that
are getting exorbitant contracts that you bankrupt the city eventually, you
chase out all the makers. You leave just behind the takers. What do you
think about that?

DEAN BAKER, CO-DIRECTOR FOR THE CENTER FOR ECONOMIC POLICY RESEARCH:
Well, yes. You know, it is just about every part of that is wrong. Let me
back up a second, though, to pick up on one of the points Lee made. This
is a contractual obligation. I just find it kind of striking here because
there`s such a selectivity about how we view the contracts.

You might remember back when AIG was bankrupt. There was a big issue
they had these bonuses for their top people. Hundreds of thousands of
dollars per person, and we ended up paying them because we got lectures
including from people in the Obama administration about the sanctity of
contracts. Well, here you have contracts with workers that are actually
guaranteed by the state constitution that apparently don`t mean anything.

HAYES: That was a great -- that`s a great -- let me just emphasize
that because that episode was, it was fairly early in the Obama
administration. There were all these bonuses set to be paid to top AIG
executives. They were going to be lots and lots of money. There was
massive populous outrage across the political spectrum. And, the answer
that came from everybody was that these bonuses had to be paid because
these were contractual obligations and you could not just rip up contracts.

BAKER: Exactly. And, here it is -- you know, when it`s ordinary
workers rather than folks on Wall Street, they`re prepared to rip up
contracts. That`s what we`re talking about here. So, I think people
should be outraged and Lee`s exactly right. And, you know, he`s
emphasizing the hardship. But, also, again, you know, I`m not a lawyer;
but, I mean these are contracts that you`d expect to see honored.

But, you know, taking this, you know, piece by piece, "A" we know
public sector workers are not paid more than private sector workers on
average. We`ve done some research on that. My friends at the economic
policy institute have done that, when you adjust for experience, for
education. What you find is that their pay actually is a little bit less.
It`s generally made up, more or less, by benefits -- you know, public
sector workers tend to have better retirement benefits, health care
benefits.

But, even with that -- you know, again, it will vary city by city,
state by state. Their pay ends up being a little bit less than the private
sector counterparts. So, it is simply not true. You don`t have the story
of, you know, public sector workers, at least on average. I`m sure there`s
someone, somewhere, you know? But, on average, they`re not living high on
the hog.

The other part of this story that is just incredibly cynical, we had
horrible national policies that have devastated industrial areas like
Michigan, like Ohio, like Illinois, where I`m from. And, the cities have
been hit hardest by this, and you get this incredible cynical story where
"A", we sort of ignore the national policies that had a devastating impact
on our manufacturing sector across the country. But, then "B" on top of
that, we have the sort of perverse urban policy where you could just step
over the city line and leave all the problems behind you.

HAYES: Right!

BAKER: And, that`s happened in a really big way in Detroit. And,
it`s not something overnight. This has been going on for 40 years -- 40-
plus years. And, surprise, surprise, you eventually end up with a very bad
story.

HAYES: Lee -- just stop right there for one second, Dean. Because,
Lee, I want you to weigh in here and I want you to respond to what we are
hearing from conservatives about Detroit, which is two pronged. One is
that this is the -- this shows the bankruptcy of liberal governance, but
also to use it to talk about public sector unions as basically the villain
in this tale, and the villain not just in Detroit but in municipalities and
states across the country as the folks that are putting local governments
in dire straits.

SAUNDERS: Well, I would argue that we aren`t the villains. I mean,
we are unions representing collectively. Workers and working families, who
are trying to make ends meet, play by the rules. They are doing everything
bit they can -- everything they can to serve the public.

They`re making very modest income with a modest retirement. $19,000 a
year, again, in the city of Detroit is not exorbitant. It`s modest. I
would say that we are not the villains. Unions are not the villains.
Working families are not the villains. The real villains are the
corporations and the banks and Wall Street, who are trying to continue to
rip off working families, trying to rip off people who are trying to play
by the rules every single day, taking advantage, trying to gain more power
and more wealth at the expense of working families. Not only in Detroit,
across this country -- But across this country.

That`s what we`ve got -- we got to get that word out. I mean, this is
blatantly unfair. Blatantly unfair when you`re attacking pensions. When
you`re attacking health insurance. When you`re attacking unions and
attacking contracts. When, in fact, corporations in Wall Street are making
billions and billions and billions of dollars at the expense of those
trying to play by the rules every single day.

HAYES: Dean, the argument you hear from conservatives about this,
about this dynamic is that there`s something perverse about local elected
leaders being able to make pension promises out into the future that they
won`t actually have to deliver on, and that it`s very easy to essentially
pander to AFSCME or to public sector unions with future promises of
pensions and this is a structural problem that we have to be clear-eyed and
face head-on. What do you say to that?

BAKER: Well, look, you always should have good accounting. There
have been irresponsible officials I am beating up on former Mayor Daley in
Chicago, because they have been their pensions. He didn`t make payments.
But, look, it`s not just pensions. Cities sign deals all the time. Mayor
Daley in Chicago famously signed a deal with Morgan Stanley turning over
the operation of parking meters for 75 years and probably got half, if even
that of what he should have gotten on a fair deal.

So, you know, that`s the way governments work. You make long-term
contracts. You want transparency and you want to see that people in this
case make the commitments, make the payments that they`re supposed to make.
In Daley`s case, incredible story. Here`s this guy, he went a decade
without making payments to the pension funds. He obviously knew what he
was today and today he goes around. He is on corporate boards. He is on
foundation boards. This guy is the Bernie Madoff of big city mayors but
he`s touted to the sky. So, you know, you do have irresponsible people.
No doubt about it.

HAYES: Yes. But, I think the point here, Lee, and Dean, is really
important is that when those promises were made, if they were made
irresponsibly, they were made by someone who aren`t the 19,000 pensioners
in Detroit struggling to get by. Lee Saunders for the AFSCME Union and
Dean Baker from Center for Economic Policy Research. Thank you gentlemen,
both.

SAUNDERS: Thanks you, Chris.

BAKER: Thanks, man!

HAYES: That is "All In" for this evening. The "Rachel Maddow Show"
starts now. Good evening, Rachel.

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

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