updated 10/7/2013 11:49:09 AM ET 2013-10-07T15:49:09

ALL IN with CHRIS HAYES
October 4, 2013

Guest: Tim Carney, Robert Costa, Kavita Patel, Ta-nehisi Coates, Josh
Barro, Diane Ravitch


CHRIS HAYES, HOST: Good evening from New York. I`m Chris Hayes.

House Republicans are at it again, playing a piecemeal game in the
hope of winning public opinion. Like earlier this week when they
introduced a separate resolution to reopen the World War II Memorial in
D.C.

And like yesterday when they introduced a resolution to resume funding
National Institutes of Health, while today they came together to support
another mini-C.R. that would fund WIC, which provides food and nutritional
education for millions of low-income women and their children, a program
they previously tried to cut.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: We`ve got to be sure that our most vulnerable
citizens don`t fall victim to that politics.

UNIDENTIFIED MALE: Moms and kids shouldn`t suffer because Senate
Democrats have shut down the government.

UNIDENTIFIED MALE: Will they deny food to women, infants and
children?

UNIDENTIFIED FEMALE: Look to your heart. We`re not talking about
defunding Obamacare.

UNIDENTIFIED MALE: And will applaud (ph) and say that we don`t want
to provide this funding for women and children? I have six kids of my own.

HAYES (voice-over): The united front displayed by Republicans in
recent days stands in stark contrast to the division that preceded their
shutdown.

KARL ROVE, REPUBLICAN STRATEGIST: I think that`s a horrific outcome
for the Republicans.

HAYES: Once the shutdown began, the establishment fell in line with
the insurgents.

ROVE: This is going to make the Democrats look out of touch and
intransigent and ugly.

HAYES: But that was just for public consumption. Today, the behind-
the-scenes discontent is once again taking center stage -- the House
suicide caucus finding itself besieged by the establishment and big-
business interests that have dictated the Republican agenda for decades.

HANK PAULSON: There is one element that does not reflect the views of
the Republican Party. What they are doing is they have hijacked the
debate.

HAYES: Wall Street is starting to panic about the genie they have let
out of the bottle.

UNIDENTIFIED FEMALE: The narrative out of Washington the last couple
days seems to be that it`s going to be worse than 2013.

CHUCK TODD, MSNBC ANCHOR: Instant crisis if it`s breached?

UNIDENTIFIED MALE: Instant crisis, in my mind.

AL BROADOUS: Debt ceiling can really have catastrophic results.

UNIDENTIFIED MALE: It`s just like "Thelma & Louise." It`s all just
fine until you actually go off the cliff.

HAYES: The chamber of Congress has told Republicans to pass a budget.
The Business Roundtable has said they want to compromise. And they have
reason to be nervous. They`ve been listening to Republicans default
denialism.

REP. STEVE KING (R), IOWA: All this talk about a default has been a
lot of demagoguery.

REP. RAND PAUL (R), KENTUCKY: The debt payment`s about $30 billion.
We just promise we`ll always pay it.

UNIDENTIFIED MALE: You`re going to default. Anyone that says that is
looking you in the eyes and lying to you.

HAYES: Louisiana Representative John Fleming told "Politico" nothing
happens if the debt ceiling is reached. Texas Rep Steve Stockman tweeting
today, "Even if debt ceiling stays, we`ll still be paying all our bills."

And if that`s not scary enough, the architect of the current
government shutdown gave this confused, troubling analysis of the debt
ceiling earlier this year.

SEN. TED CRUZ (R), TEXAS: What would happen if the debt ceiling was
not raised is it would be a partial government shutdown, and we`ve seen
this before. We saw this in 1995 when Republicans in the House shut down
the government. And what happened was, it was a partial shutdown. There
were some political costs to be paid.

But at the end of the day, because Republicans stood strong in 1995,
we saw year after year of balanced budgets and some of the most fiscally
responsible policies Congress has produced in the modern era. If we stand
strong, we can do that again.

HAYES: The grim irony, Wall Street and big business helped buy this
government shutdown. In Obama`s first year in office, Wall Street gave
Democrats almost $30 million a Republicans just over $20 million. Leading
up to the 2012 election, Wall Street gave more than $36 million to
Republicans compared to just less than $10 million to Democrats.

The Chamber of Commerce last year spent over $35 million on elections.
Of that amount, just over $300,000 went to Democrats.

Now, Wall Street wants a return on that investment. And the suicide
caucus isn`t having it.

CRUZ: There are a lot of folks in the Washington establishment who
don`t want to hear from us. There are rules. You are not supposed to
speak for the people.

HAYES: Privately, Speaker Boehner reportedly told his caucus he will
not allow a default. He also said he wouldn`t shut the government down,
but here we are.

JOHN HARWOOD, CNBC: Wall Street`s been pretty calm about this. Is
that the right way for them to look at it?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: No, I think this time,
it`s different. I think they should be concerned.

(END VIDEOTAPE)

HAYES: Joining me now is Tim Carney, senior political columnist for
"The Washington Examiner," visiting fellow at the conservative think tank
AEI. And, Tim, your column today is about precisely this kind of dynamic,
the different sources of power inside the Republican coalition with big
business and Wall Street and a kind of ascendant power of the Tea Party.

What is your understanding of how this dynamic`s shaking out?

TIM CARNEY, THE WASHINGTON EXAMINER: There used to be one place for
Republicans to get campaign cash, and that was basically K Street, the
lobbying corridor here in D.C. If you wanted to raise money and you need
to do raise money to win re-election, you had to turn to big business. And
that explains why Republicans would campaign as we`re limited-government
conservatives, but then they hand out corporate welfare to, you know,
Boeing or the drug industry or anything like that, because ultimately their
campaign funding came from big business.

But then the Tea Party, through tech -- you know, technology and the
Internet, through the ability of the grass roots to really understand what
was going on, and through sort of a growing dissatisfaction with the
Republican leadership, there became a second base. And a lot of liberals
have trouble understanding this, so let me explain this.

HAYES: Speak slowly.

CARNEY: The Tea Party is not big business. It is the anti-big
business wing. The Tea Party is a bunch of -- the people who watch FOX,
these conservatives who had small businesses. These are conservatives who
were on Wall Street and weren`t like --

(CROSSTALK)

CARNEY: And they donate money.

HAYES: Let me stop you right there. I think there is some truth to
this, and there is some real misleading aspects of that. Here`s the truth
to it. Right now I think on the debt default, on the debt ceiling, you are
right, that the Tea Party base and big business are absolutely at odds with
each other. And we`ve seen other votes like that.

The first TARP vote is the perfect example of that, where the real
kind of Tea Party base in the House voted against the bailout, Wall Street
and big business wanted the bailout.

But then on other things, on House Financial Services Committee was
going to vote this week to gut directives deregulation. Now, it strikes me
that the grass-roots FOX viewers aren`t going around up in arms about
derivatives deregulation. That is just a concession to Wall Street. I
mean, so let`s not fool ourselves what`s going on here.

CARNEY: There are places where Wall Street and where big business
want limited government, and there`s going to be overlap. But Ted Cruz and
Mike Lee and Marco Rubio and Pat Toomey, all these guys -- and Rand Paul --
all these guys came to Washington by beating K Street.

This is my column coming up in "The Examiners" pointing out how all
the corporate PAC money, all the lobbyist money went into sort of the
modern establishment of the Republicans, while Ted Cruz was getting money
from the Senate Conservatives Fund and from Club for Growth. And so you
had the ideological money.

HAYES: Ideological money. See, that`s the important thing. That`s
the way to kind of understand this, is that you`ve got big-business Wall
Street institutional money which is amoral and non-ideological.

CARNEY: And pragmatist.

HAYES: Right. And then you have, you know, like the Koch brothers
are both big money. I mean, they represent big business, but they also
have an ideological agenda they`re pushing. Those two have to be separate.

CARNEY: Think about the parallel to make it more sense to your
audience is sort of you guys have the Netroots. You guys have real liberal
money pouring in. So, think about Elizabeth Warren and Hillary Clinton,
that dichotomy.

HAYES: Right.

CARNEY: Elizabeth Warren wing, the analogy is Ted Cruz. The Hillary
Clinton wing, the analogy is Mitch McConnell.

HAYES: Hold that thought. I want to bring in Robert Costa,
Washington, D.C. editor for the conservative "National Review" and CNBC
contributor.

And, Robert, there`s a bunch of different cleavages behind the scenes
that were very open a few days ago, and they`ve been pushed behind the
scenes because Republicans have done a good job of presenting a united
front. But we heard this amazing report in "The New York Times" about a
meeting in the Senate in which you had had sitting senators, Kelly Ayotte
among them, Mitch McConnell, screaming apparently, I mean, really raising
their voices, yelling at Ted Cruz and Mike Lee.

What was that all about?

ROBERT COSTA, CNBC CONTRIBUTOR: It really comes down to hard
politics. And when you talk to Senate Republicans, and I`ve talked to them
after their luncheons that usually happen on Tuesday afternoon, they can`t
stand that Senator Cruz is going at them publicly and trying to undermine
their own conservative reputations. And that`s what really gets at them,
gets under their skin.

HAYES: Is that going to come do anything? I mean, think what`s
interesting so far is the House Republicans and Senate Republicans, we saw
the open mike moment between Rand Paul and Mitch McConnell had done a very
good job of presenting a united front, right? But I`m wondering how long
that`s going to last if these kinds of tensions are still festering behind
the scenes.

COSTA: No, I think those tensions are actually spilling out into the
public. I was just walking here from the capitol. And I was talking to
some house members. And they just kept bringing Ted Cruz up to me,
Republicans, in assailing him without me even bringing up the Texas
senator.

When I talk to Republicans in the Senate, they really think that Ted
Cruz is becoming a loner. I think this is going to cost Senator Cruz
politically because he`s only in office eight, nine months now, and he has
very few allies beyond Senator Lee. If he wants to build coalitions for
the future to make and build conservative policy, where are the allies now
in the Republican conference? I can`t find them.

HAYES: OK, here`s the other thing I can`t get to. And then, Tim, I
want you to weigh in on this. I cannot get what is the out here? I am
really confused. The outs seem to be the proposals on the table every day
is a new mini-C.R. to fund some small part of the government.

But that is not a resolution to the crisis, at least when the issue
was delay the mandate for a year and make our staff pay more for health
care. I understood what the demands are. I don`t understand what the
demands are or what`s achievable -- what`s the out here?

COSTA: I`m not even sure if the leadership really knows, Chris. I
was just talking to Republican leadership sources, and they`re really
worried that if they can`t sell a small-board deal to House conservatives
and to Senate conservatives, there is a real risk of default because
conservatives, many of them have dug in their heels so much because as Tim
mentioned, there`s this outside money, this outside narrative building that
unless there`s a full delay for defund of Obamacare, conservatives will
just oppose it, and that`s a real problem for Boehner.

HAYES: Tim for someone like you, you and I share it, this disposition
to distrust the establishment, to distrust Wall Street, to hate K Street,
you and I are on the same page about that and I never liked Ted Cruz as
much as when he`s being clucked at by the establishment, OK? That`s when I
like the guy.

That said, this debt ceiling shows the perils of doing your thinking
by being against whatever Wall Street is for.

CARNEY: Yes.

HAYES: Because it is seriously dangerous. Do you agree with that?

CARNEY: I do. And that I think that shedding the first step in sort
of reforming the Republican Party has been shedding the addiction, the
dependence on K Street. The next step is going to be getting -- not
driving yourself down cul-de-sacs as I believe Cruz has done, and I
basically agree with what Bob was just saying there.

And so, the question is, is there a way out? And it`s tricky. Is
this a full-year CR? I put up a blog post saying what Republicans for is
abolishing some corporate welfare program. The sugar subsidy, Boeing
subsidy, something like that, that you have to get out of this.

And we`ve gone from Republicans sort of playing on conservatives
making impossible promises and then casting fake votes and then going ahead
and doing what "K" Street, to now Ted Cruz sort of promising a different
sort of impossible thing, and who knows where it goes?

HAYES: Right. That`s exactly the problem, though. You know, I agree
with you.

I would love nothing more than for us to come together on something
like sugar subsidies or corporate welfare. But that`s not what`s going to
happen out of this. I mean, and that`s not going to be the thing that
satisfies the base. And this is where I think there`s a little bit of
disconnect, Tim, in your understanding of where the base is. I`m disposed
to agree with you on certain parts of this analysis, but what the base
wants, what they`re getting from both the institutional Tea Party
grassroots and the folks that are calling into offices is they want some
blood, right?

I mean, what is coming -- what calls are coming into the office,
Robert?

CARNEY: Oh, it`s a great question. And I think this is the real
problem right now for the Republican Party. They`re not talking about
conservative policy. They`re not debating principles. Everyone`s really
on the same page. The party has moved to the right.

And everyone`s really in that general area. It`s all about tactics
and strategy, and they`re quarrelling constantly over that. It`s always
going to end messy because it`s not about ideas. It`s not really about
policy. It`s about how do you posture in a standoff, in a stalemate?

HAYES: Tim Carney from "The Washington Examiner" and Robert Costa
from "The National Review" -- thank you, gentlemen. Have a great weekend.

COSTA: Thank you.

CARNEY: Thank you.

HAYES: Coming up --

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: This isn`t some damn
game. The American people don`t want their government shut down, and
neither do I. All we`re asking for is to sit down and have a discussion
and to bring fairness -- reopen the government and bring fairness to the
American people under Obama care. It`s as simple as that.

(END VIDEO CLIP)

HAYES: The shutdown that was supposed to be because of Obamacare has
actually managed to overshadow the actual implementation of Obamacare. How
GOP theatrics helped the president`s press coverage next.

(COMMERCIAL BREAK)

HAYES: We always like hearing from you on Facebook and Twitter. The
GOP, not as united as they may seem. On one side, you`ve got big business.
On the other, there`s the conservative grassroots.

So, tonight I ask you, in this most epic Hollywood-esque showdown
ever, who would you rather see emerge victorious and why? It`s a hard one,
big business or the Tea Party? Tweet your answers @allinwithchris. I`ll
share a couple at the end of the show.

So, stay tuned. I`ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CRUZ: And the House responded to the millions of Americans who are
hurting under Obamacare. And I think the Senate needs to do the same
thing.

(END VIDEO CLIP)

HAYES: As we end the first week of the shutdown, one of the grand
ironies is that the dreaded Obamacare, the shutdown was originally about
according to the Republicans, has overshadowed the first week of the actual
enrollment in the health care exchanges. And amazingly, the GOP messaging
on the shutdown has knocked off the front page the fact that the rollout
has had a rocky first week.

It does not been rocky from a demand perspective at all. That has
been amazing. Quote, "When the exchange opened 17 minutes later than the
8:00 a.m. scheduled start time, the Web site and call centers were flooded
with inquiries. A worker with the Nevada health exchange said that in the
first few hours, it was just raw emotion calling in. People eager for
insurance, at times in tears, wanted coverage they didn`t have before."

But this process of enrolling from reviewing the choices to filling
out the only application, to actually purchasing a plan, none of that has
been working very well so far. This "New York Times" headline was typical.
"On the second day of the exchanges` operation, users were still
encountering loaning waits, malfunctioning web pages and messages telling
them to try again later., particularly in the 34 states where the
marketplaces are being managed by the federal government."

And then there`s this -- enrollment in Obamacare`s federal exchange so
far may only be in single digits. We`ll have more on that in a moment.

So, all of this somewhat concerning especially for a single
legislative achievement and as someone who this law to work because I
desperately want to see people get health insurance, I`m more than a little
worried.

One thing that makes me feel better is this: selling Medicare is not
easy. That headline by Sarah Cliff (ph) of "The Washington Post`s" "Wonk
Blog" is from March 3rd, 1966, back when 5,000 federal workers across the
country were actually knocking on the doors of seniors to try to enroll
them in what was then a brand-new program called Medicare.

Critics predicted disaster then, too. But of the 19 million seniors
eligible, 93 percent had enrolled by the summer of 1966.

Joining me now is Dr. Kavita Patel, a primary care physician at Johns
Hopkins Hospital and Brookings Institution fellow.

She worked directly on the Affordable Care as a senior adviser in the
Obama administration White House. OK, Doctor, I had you on the first
night. And it was hard, you know, you can`t judge anything from the first
day. You sure as heck can`t judge anything from the first four days.

But what`s your feeling about the stories we`ve heard about the
difficulties people have had in actually getting to the end point where
they can sign up for a plan?

DR. KAVITA PATEL, BROOKINGS INSTITUTION FELLOW: Well, Chris, I think
you said it just accurately, that there have been glitches, and at the same
time, there have been this amazing outpour of raw emotions. Four days in,
I`ve got to tell you, we`ve got six months of enrollment. We`re starting,
and this is going to get better and better. And I think -- I think it`s
not surprising that we had these glitches.

HAYES: So, OK, I want to push a little bit here, though, because
again, I do not want to, you know, gleefully be pointing to Obamacare isn`t
working. I think there`s tremendous amount of politically motivated
attacks, but at a certain point, it really matters if people can get
through the system. I mean, there`s a threshold of -- and I know this for
myself. I`m one of those people that if someone tells me to click a link
and it takes more than 30 seconds like a pre-roll ad or something, it`s
like I`m out of there.

And getting people signed up is a real matter of successful law and
also sheer humanitarian import, are things getting fixed, I guess, is my
question? Like how sure can we be that this stuff`s going to get fixed?

PATEL: Yes, one thing we know for sure, that even with this
government shutdown, the federal government has already begun to add the
technical fixes that they need to in the form of manpower servers, which I
think is ironic, given how much we`re talking in Washington, D.C., about
things not working. There are people desperately behind the scenes trying
to make these things work.

I agree with you, that if you`ve been waiting to do this and that you
get on board and you sign and click and then there`s lots of burdens and
hurdles that you won`t be as inclined to do it, especially, to be honest
with you, what we`re all concerned about are some of those really young,
healthy people being frustrated by it.

HAYES: Right.

So there`s some news that came out today in which HHS officials said
they`re actually going to take healthcare.gov offline for the weekend to do
some server maintenance, to add some new capacity. That has predictably
invited an attack by John Boehner. You see what Republicans have done is
anytime anything is delayed in this, they`re pointing to it as this thing`s
coming apart at the seams.

What do you say to that?

PATEL: I think it`s very easy to attack when -- you know, it`s funny,
Google and Gmail and twitter, whenever they have some lapses and breaks, it
happens. It`s acknowledged. And somehow life goes on.

But we`re using this as a way to say, oh, this is an epic failure. I
think what they`re choosing to do is look at the glass half empty. And I
can promise you that for those people, whether they be thousands or
hundreds of thousands, the bottom line is that more than nothing, people
are getting access and finding a way to actually get health care. And when
you think about what that means for the country, that`s a pretty big deal.

HAYES: One of the things you mentioned was Twitter. And we were
talking at an editorial meeting today about the fact that the Twitter IPO
is coming up.

And at the beginning, the Twitter fail (ph) a running joke. The thing
was down five times a day. It was constantly, constantly, constantly
crashing. They`ve, over time, succeed despite that, they`ve added
capacity. I think the best analogy, better than Medicare in some ways, is
Medicare Part D.

Medicare Part D was launched amidst intense political scrutiny. It
was very controversial in certain ways. It was very complicated and it was
really unclear whether seniors are going to sign up, be able to figure out
how to sign up, or whether it was going to work. This is from 2006, I
believe, when the program launched, "Medicare meltdown. Many elderly
aren`t getting vital medicines because of glitches in the new drug program.
Nearly two weeks after it began, the new Medicare prescription drug program
remains plagued by problems and calls for help are growing, advocates
report."

Medicare Part D is now absolutely beloved and incredibly popular,
right?

PATEL: Absolutely. And we even had seniors back, you know, several
years ago, with Medicare when it launched as you mentioned. We had seniors
showing up to get their prescriptions, and pharmacies had no idea what
their plans were or even who these patients were.

So, could you imagine how that would play out? And in light of that,
all we`re talking about is web traffic being slow and links not working.

HAYES: Dr. Kavita Patel, thank you so much for your time.

PATEL: Thank you.

HAYES: We`ll be right back with #click3.

(COMMERCIAL BREAK)

HAYES: Coming up, she`s been referred to as an intellectual zigzagger
who has ended up in solidarity with the destructive radicals of the
education left. She`ll be my guest ahead.

But, first, I want to show you the three awesomest things on the
Internet today.

We begin with the shutdown, the fact that everyone is more than a
little tired of it. Congressman -- Republican Congressman George Holding
of North Carolina is the most obvious about it. While presiding over the
House floor last night, Holding was soothed by the dolted sounds of Louie
Gohmert, so much that cameras caught him taking a snooze in the speaker`s
chair. Ah, the watchful eye of the C-Span cameras.

"BuzzFeed`s" Dorsey Shaw declared that the government shutdown is
summed up in gifth, and here it is -- Holding counting sheep. Did we turn
the government back on? No? OK. And back to sleepy time. Nighty night,
functioning democracy.

The second awesomest thing on the Internet today: our new favorite
head banger. Until now humans were the only known mammals that could keep
the beat with music. Aside from the occasional monkey puppet from old
Levi`s commercials. But now, there`s Ronan, the California sea lion that`s
been trained to bop along to the beat.

OK, pretty cool, but I`ve got to say for such a notable evolutionary
advancement, I`m not sold on the music choice. The first non-human mammal
that keep the beat should have a sound track that`s way more epic.

Expertly done. Now, that is more like it. Keep that up, Ronan.
You`ll be on stage with John Tesh in no time.

The third awesomest thing in on the Internet today, a speaker blowout.
Twitter was the talk of the tech and finance world today. The social media
site launched some initial public offering that got Wall Street buzzing.
Looking at this, you`d think the IPO was a big success.

The problem is this isn`t Twitter stock. No, it`s stock for Tweeter,
a home entertainment group. Finance experts explaining, whoops, some
getting their Twitter ticker wrong. Tweeter stock is on fire. In case you
don`t remember, Tweeter is a bankrupt home electronics company famous for
selling stereo speakers. It`s worthless penny stock jumping 684 percent,
of a future market driven by the culturally illiterate.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We want openness of the press. We don`t want to
have to use Tweeter.

(END VIDEO CLIP)

HAYES: There`s the possibility this is part of common petty stock
scam. But regardless, congrats to all the new Tweeter stock owners. And
I`m not saying it`s the best way to make a buck, but maybe when Hulu
announces its IPO, you want to keep an eye on those things. They`ll be
flying off the shelves.

You can find all the links for tonight`s #click3 on our Web site,
allinwithchris.com. We`ll be right back.

(COMMERCIAL BREAK)

HAYES: Big news out of Texas last night. And it`s big news for even
bigger reasons than you think.

(BEGIN VIDEO CLIP)

WENDY DAVIS, TEXAS GUBERNATORIAL CANDIDATE: I am proud to announce my
candidacy to be the 48th governor of this great state!

(CHEERS AND APPLAUSE)

(END VIDEO CLIP)

HAYES: Yesterday was the day for Wendy Davis. The Texas State
senator throwing her hat in the ring to become the first democratic
governor of the lone star state since Ann Richards. You remember Wendy
Davis. The woman who waged an epic 11-hour filibuster to temporarily block
a republican proposal restricting abortion in the state, sporting a pair of
neon pink sneakers throughout. And the Davis filibuster wasn`t some Ted
Cruz style spectacle. This was a real-deal filibuster, an attempt to block
a republican bill restricting women`s access to medical care.

Davis`s actions galvanized folks across the country. A flood of
supporters gathering inside the state capitol to cheer her on. And when
the bill was ultimately blocked at the midnight deadline -- Davis became an
overnight rock star in the Democratic Party. Inspiring means, nail art, a
hash tag, even Taiwanese animation. But a Wendy Davis candidacy is more
than just good politics for Democrats. It`s literally a matter of life or
death for many Texans.

According to Gallup for the fifth straight year, Texas leads the
country in its percentage of people without health insurance. A whopping
29 percent of Texans don`t have coverage. That`s over six million people,
roughly the population of the entire state of Massachusetts. And the trend
is getting worse. Piling on, the state`s current governor, Republican Rick
Perry, rejected the very thing that would help those people most to receive
coverage under Obamacare.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MAN: Medicaid expansion is simply put a misguided and
ultimately doomed attempt to mask the shortcomings of Obamacare. Texas
will not be participating in Medicaid expansion.

(END VIDEO CLIP)

HAYES: Rejection of the Medicaid expansion around the country leaves
eight million people without health insurance, many of them poor single
mothers. Wendy Davis, a single mom at age 19, supports the expansion. As
a governor, she would help the uninsured in Texas on a road to recovery.

Texas is not the only state to reject the Medicaid expansion. In
fact, 26 states have said no to this key provision of Obamacare. And that
risks gutting a huge part of what this law was supposed to be chiefly
about. Insuring the uninsured. "New York Times" estimates around 60
percent of the country`s uninsured working poor live in the states opting
out of the Medicaid expansion. But if Wendy Davis can reverse opposition
to Medicaid expansion in the biggest state of the south, that might be the
trigger to get Texas`s neighbors on board as well.

In fact, if you look at the map of these states rejecting Medicaid
expansion, you`ll see that many of them are clustered in one geographic
region of the country. Jamelle Bouie writing for Daily Beast offers a
particularly provocative comparison noting that nearly half of the states
seen here also made up the confederacy. Only one of the former confederate
states opted into the Medicaid expansion. Let`s hear it for Arkansas.

Joining me now is Ta-nehisi Coates, senior editor for "The Atlantic"
and Josh Barro, politics editor at "Business Insider." And Ta-nehisi, you
have written so much about the way that race plays for our politics. When
you see those two maps side by side, when you read "The New York Times"
article about who the uninsured working poor in those states are, what`s
your reaction to that?

TA-NEHISI COATES, THE ATLANTIC: Utterly horrifying, the idea that the
expansion of the social safety net would leave out those people who
historically have been most vulnerable. I think it was like two-thirds for
African-Americans, poor African-Americans, I believe, is devastating. It`s
emotionally devastating. What is a social safety net worth if it can`t
protect the most vulnerable people?

HAYES: Josh, there`s a really provocative article by Joan Walsh about
the way in which racial rhetoric about the social safety net has led us to
the point of the shutdown. I`d like to get your response to it right after
we take this break.

(COMMERCIAL BREAK)

HAYES: We`re back and I`m here with Ta-Nehisi Coates and Josh Barro.
Josh, you`ve got a situation which you have got a number of states that are
in the south, they are states that are majority white with large non-white
populations that tend to be poorer and more likely to qualify for the kind
of benefits under Medicaid expansion. There are also states run by
republican politicians for the most part. Those republican politicians who
receive the vast majority of their votes from white voters. And when you
put all those things together, it looks like there is a very frank, clear,
straightforward racial story to tell about what`s going on with something
like Medicaid expansion in the south.

JOSH BARRO, BUSINESS INSIDER EDITOR: There is that story to tell.
And that`s a significant part of what drives opposition to welfare programs
or other means-tested entitlement programs in the United States. But I
think -- and this is the mistake I think Joan Walsh makes in her Salon
piece. You don`t want to talk about that like it`s the only driver of this
because, for example, other states not expanding Medicaid include New
Hampshire and Maine, which are almost entirely white. And Republicans
there are still strongly opposed to Medicaid expansion. So I think when
Democrats focus on this as a driver for why Republicans oppose these
programs, it`s a wholly illegitimate reason for opposing them and it allows
you to say my opponents are illegitimate and you lose other arguments that
they`re making that require a response that are more legitimate.

COATES: The problem with that though is that race is the most
objectionable argument. And so there`s a real responsibility to call that
out. That doesn`t mean it`s the only argument being made, but it`s a
wholly, you know, objectionable, completely, you know, unethical, immoral
argument that deserves to be called. That doesn`t mean that everybody`s
doing it, but you know, it has to be answered for, I think.

HAYES: And so you`re saying that in a sense that because racial
objection to the -- social safety net isn`t a different moral category than
some other kind of expansion.

COATES: Right. Right. Right.

HAYES: Then it should be called out. Of course, the difficulty and I
think the thing I hear from conservatives all the time and Tim Carney who
was on the show earlier today and Matt Welch who`s been on the show is
that, this is doing this kind of easy stereotyping, liberals like
ourselves, to be, like, oh, you don`t like our big-government health care
because you`re racist. What do you say to that?

COATES: Right. I think part of the problem is we get into this
debate where it`s like is Ted Cruz racist? Is Rand Paul racist? We try to
peer into people`s heart. But the fact of the matter is if you look at the
history, the expansion of the social safety net throughout history, it has
always been racialized. And so, those of us who live on the other side of
that racialization find that deeply, deeply objectionable. And we feel the
need to point it out when we see it.

HAYES: And, of course, and Social Security and the new deal is a
perfect example in which there was this kind of deal with the devil made
with southerners.

COATES: Right, the G.I. bill. I mean, you can go down the list.

HAYES: And Josh, the other issue I would say and to your response of
the idea of what about Maine and, you know, northern states is that there`s
also a degree to which the nature of the modern republican institutional
party and its politics have kind of been exported from the south, that the
driving institutional structure, the driving ethos is increasingly the
ethos of southern conservatism. That is where the grass roots of the party
is. That`s where the kind of center of gravity of the house republican
caucus right now is, and that that actually has an effect. I mean, that
that actually sets up the kind of institutional conditions that means that
that`s not to say there`s some sort of contagious racism, but that actually
that is having an effect in the way that all kind of northern republicanism
looks like.

BARRO: Well, I don`t know how you can diagnose that. I mean, you
have Republicans -- I mean, Republicans have run the state legislature in
New Hampshire for basically the entire history of the Republican Party in
the United States. So I think, you know, if you look at conservative
republican Tea Party-style activism and define that as southern, then when
you look at places that have that kind of activism, you`ll end up calling
it southern but that`s just circular. I think you know, places like Idaho
and Wyoming that are justice conservative in their voting pattern, as deep
southern states have the same sort of opposition to these kinds of social
programs with very different racial politics. And so I think the race
thing is real, but I think it`s not an explicitly southern thing to have
that.

HAYES: How do you understand a state like New Hampshire rejecting the
Medicaid expansion?

BARRO: I think that -- I think that Republicans have been strongly
opposed to the expansion of the health care safety net for the entirety of
the last 50 years. When Bill Clinton was president, they launched a
scorched earth campaign against his health care plan and succeed it in
defeating it. So I think Republicans are very energized against the
president, against his plan. But I don`t think that it`s, you know,
obviously, you can`t understand that as a black versus white thing because
nearly everybody who would go on Medicaid in New Hampshire is white.

HAYES: There`s this piece that Ryan Lizza wrote in which he was
talking about what Charles Krauthammer called the suicide caucus which is
basically the 80 members of the House republican caucus who signed the
original letter calling on John Boehner to have the shutdown fight over
defunding Obamacare. And what he did is, he went through and he looked at
the kind of demographic base of this group. And he finds that they`re, you
know, overwhelmingly from the south, that their voters, obviously their
voters chose Mitt Romney by wide margins, that their voters are much whiter
than the rising electorate.

It does seem to me that you do have an increasingly racial division
between the kind of gerrymandered white particularly southern base of the
House Republican Party which is now the governing center of what the
Republican Party is and the multiracial Obama coalition that voted for
Obama after he passed Obamacare and essentially ratified it that way.

COATES: Right. And if that`s your base, there will be some effects.

HAYES: Right.

COATES: You know, to put it bluntly. That does not require
individual racism from individual senators or individual house of -- you
know, congressmen from the House of Representatives. That originates in
the fact that this is part of who we are. This is a systemic issue that we
have. And if you`re dealing with a situation in which portions of the
electorate are isolated over here into a sort of homogeneous situation,
folks will represent.

HAYES: How do you think you fight against the kind of racialization
of the social safety net? I mean, you have this issue in which there`s
been so much rhetoric about what the people who are the beneficiaries of
government look like and how they`re racially coded. How do you undo that?

COATES: I don`t know. I don`t know. I mean, you know, we`ve been
debating on this for the past three days about this, and the honest answer
is, I don`t know. I know a lot of sociologists say, nationalize, that`s
the way you do, don`t leave it up to the states. There`s debate about how
to make that politically actionable. I don`t know, Chris.

HAYES: Josh, what do you think?

BARRO: I have one idea. I don`t know that this will work. But I
think there is a genuine problem in the American social safety net where
you have a lot of people who are working poor or on the cusp of being
working poor and as they lose benefits as they earn more income, basically
they feel like they`re climbing up a ladder they can`t get up. It`s
poverty perhaps that are created by these phase-outs. And so, I think if
we have a comprehensive reform of these programs that try to turn that into
more of a slope, and actually Obamacare does this to an extent.

HAYES: Yes.

BARRO: Currently you have this problem where if you don`t work and
you`re on Medicaid, you go back to work and you`re going to lose your
health insurance. That discourages people from working. More thoughtful
approach to that would make welfare less of a poverty trap and that might
change public perceptions that welfare is encouraging people to be lazy or
not to work. So, I think real policy improvements actually could also
improve the racial political environment.

HAYES: Part of the problem also, though, deals with the degree of
good faith to assume on the part of your critics. And one of the things I
think that`s been difficult about watching the Obamacare debate is there is
some small segment of people I feel like who are in good faith are trying
to improve the law -- will have deleterious effect, and then there`s a lot
who I feel like are just bad faith trying to destroy this thing because
this thing represents something ideologically challenging to them or they
want to see President Obama fail. And that`s where it`s much harder to
engage. And that seems to be the kind of foundational soil into which the
seeds of the shutdown have been planted. Ta-Nehisi Coates from the
Atlantic and Josh Barro from Business Insider. Thank you, gentlemen, both.

COATES: Thank you.

BARRO: Thank you.

HAYES: She once led the fight for standards and testing in her
schools. She has now become the education reform establishment`s biggest
enemy. She`ll be here coming up.

(COMMERCIAL BREAK)

HAYES: Earlier in the show, we asked you who you`d rather see win in
an epic battle, big business or the Tea Party. We`ve got a bunch of
answers posted to our Facebook page and twitter account including Leslie
Gregg on Facebook who says, "none of the above is an option?" Jim on
twitter who says, "if I had had to choose big business, they don`t have our
best interests at heart, but Tea Partiers can cause way more damage."

Glenn Wiki (ph) from twitter rights. "I want big business to win on a
last-second field goal in a game with lots of gruesome injuries.
Metaphorical I`m sure." And finally, Andy Lesage on Facebook rights, "Big
business only because in this case, big business means not defaulting on
the debt."

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANNOUNCER: America`s students are falling hopelessly behind.
Worldwide, we`re 14th in reading, 25th in math, and less than half of our
students finish college. At this rate, the world will soon be out of reach
for America`s children.

(END VIDEO CLIP)

HAYES: Everybody knows American schools are broken. They`re failing,
and they need to be saved before it`s too late. But what if that`s not
actually true? What if the current movement to reform our schools through
testing and standards and teacher accountability is actually dismantling a
system that`s working rather than fixing a system that`s broken? That`s a
provocative argument made by the woman who may well be the biggest heretic
in American schooling and one who a decade ago was standing alongside the
reformers.

Diane Ravitch was once a proponent of many of the arguments being made
by people like Michelle Rhee who has pushed charter schools and test based
competition amongst students, schools and teachers. Ravitch is now
probably the harshest critic of Rhee and her allies whose philosophy she
says is grounded in a massive hoax perpetrated on the American people. If
you think the fight in Washington right now is brutal, it has nothing on
the fight over how to teach our kids.

And joining me is Diane Ravitch, the author of the new book, "Reign of
Error: The Hoax of the Privatization Movement and the Danger to America`s
Public." So, what I found very provocative of the book is this. Usually
the debate is framed in terms of how do we make America`s schools better.
How do we reform them? What does reform constitute? Everyone wants
reform. You attack the very premise upon which the whole thing is built,
is that our schools are bad, that they`re failing, that we`re laggards in
the world. That is such conventional wisdom. Persuade the viewers,
persuade me that`s not true.

DIANE RAVITCH, AUTHOR, "REIGN OF ERROR": Well, they`d have to read my
book. That would be a good start. But I`m an historian of education.
I`ve been writing about education since the mid-1970s. I`ve written lots
of books. And what I did was to look at the data. And what the data shows
is test scores for American students today, based on federal tests, have
never been higher. They`ve never been higher for white students, black
students, Hispanic students or Asian students. Graduation rates are at
their highest point in history. The drop at rate is at its lowest point in
history. I even looked at the international test scores and found that
we`re actually doing quite as well.

HAYES: OK. So, there`s a few things to dissect about that. One is,
there`s this equity issue. Right? Which is, OK, everyone we`re doing.
But actually, you know, I mean, I grew up in the Bronx. And my mom worked
in education in the Bronx. I`ve been around big cities my whole life. And
I know what big-city education is. I`ve worked in schools as a tutor. A
lot of those schools are really struggling. And I`ve talked to students
who are in fourth grade in a tony neighborhood in New York City and talked
to students who are in a fourth grade in a poor neighborhood in New York
City.

RAVITCH: Absolutely.

HAYES: So, look, I think I want to sort of establish the premise that
we`ve got a lot of public schools in this country in lots of parts of the
country that are in areas that have parents with not much income that are
not doing very well.

RAVITCH: Well, the schools are not doing well because our society is
not doing well. The schools that you`re describing where there is real
failure, they`re very often filled with terrific teachers. Hardworking
principals. They`re under resourced. They don`t have an arts program
because all they`re doing is testing. They have physical education once a
week because they have to do the testing. And the kids don`t have the
resources that they have in the tony neighborhood, and the biggest problem
we have in this society poverty. And you can look at any standardized --
any sort of standardized tests anywhere, state tests, national tests,
international tests, poor kids are at the bottom. Rich kids are at the
top.

HAYES: Two responses that you`ll hear from reformers. One is
controlling for poverty, there remains a racial test gap in this country.

RAVITCH: Absolutely.

HAYES: And that`s something we have to get rid of. And so, that`s
you know, that`s part of the teach for America ethos is getting rid of
that. And the second thing you`ll hear about that is, OK, fine, yes, we
should get rid of child poverty, but I`m an education reformer. I work in
education and I have to essentially play the hand that`s dealt me. So if
the head that`s dealt me is I`ve got to run a school system in Harlem or
I`ve got to run a school system in the ninth ward in Louisiana, I have to
deal with the facts on the ground which is that people are poorer. What do
you want me to do aside from complain about the fact that the parents don`t
have more money?

RAVITCH: The reason I wrote this book was because I have a dozen
chapters explaining what the research shows. What the research shows is
that everything -- these so-called reformers, I call them corporate
reformers because they use the business lingo. Everything that they`re
doing actually doesn`t work. Charters are no better than regular public
schools unless they kick out the low-performing kids. Vouchers don`t work.

HAYES: This is on average.

RAVITCH: On average, yes. Yes. Vouchers don`t work. Merit pay has
never worked in 100 years. Everything that they recommend actually doesn`t
work. What does work? Reducing class size in the high-poverty
neighborhoods. Having early childhood education. That works. Because the
achievement gap exists before kids come to school.

HAYES: I`ve seen data on both early childhood education, which the
bulk which seem to indicate that it does have a real effect. There`s also
some -- indicates that the effect is nowhere near as big as we would like
it to be.

RAVITCH: It`s one of many things but it`s very important. And
actually "The Economist" magazine ranked the advanced nations of the world,
and we were number 24 out of 45 in providing early childhood education.

HAYES: I want to play you a clip of Michelle Rhee talking about
testing. And Michelle Rhee has become kind of the face in many ways for a
better ill about a whole variety of education reforms. This is her talking
about testing.

(BEGIN VIDEO CLIP)

MICHELLE RHEE, CHANCELLOR, D.C. PUBLIC SCHOOLS: We have to have
measures by which we understand whether or not kids are learning.
Appropriately. Right? So you have to have a standardized way to determine
that.

(END VIDEO CLIP)

HAYES: So two different ways of thinking about critiquing testing,
right? One is the presence of testing themselves. The other is not having
the right tests. Sometimes it seems, in your book, you kind of move
between those two different -- there`s parts of the book where you say we
need -- children need to not be worrying about testing particularly when
the young need to be creative and playful. But at other times you seem to
be saying testing is important. We`re just doing the wrong testing.

RAVITCH: Well, I`m relying on are the tests that have no stakes at
all. Where no one gets a reward, no one gets a punishment. Those are the
federal tests. When tests are used as carrots or sticks, it distorts all
of education. What I do believe is that teachers should give their own
tests because they know best. What we`re doing now is we`re fattening up
the testing industry on standardized tests where we get the results six
months later, and it`s too late to do anything about what we learned.

HAYES: Very quickly, respond to the critique a lot of people said and
the book has a very harsh tone in which it really assumes a lot of bad
faith on the part of the people who are sort of conspiring to undo public
education. Why do you think that?

RAVITCH: Well, actually, I don`t think it has a harsh tone. I think
it has a very measured tone. I`m an historian, and I look at facts, I look
at evidence. And the evidence shows that, for example, in Washington,
D.C., which Michelle Rhee led for four years and her deputy still leads,
there`s a huge achievement gap. It`s double the size of any other major
city in the country, so I wouldn`t consider that a model. So I think it`s
important to look at evidence. But the most important thing we need to do
is to recognize the root cause of low performance and its poverty and
racial segregation. That`s hard to deal with.

HAYES: That`s great irony, those two things have gone up during the
flowering period of education reform. Diane Ravitch, author of "Reign of
Terror."

That is All IN for this evening. "THE RACHEL MADDOW SHOW" starts now.
Good evening, Rachel.

RACHEL MADDOW, HOST, "THE RACHEL MADDOW SHOW": Good evening, Chris.
Happy Friday.

HAYES: Happy Friday.

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