updated 10/8/2013 4:05:46 PM ET 2013-10-08T20:05:46

THE LAST WORD WITH LAWRENCE O`DONNELL
October 7, 2013
Guests: Howard Dean, Robert Costa, Krystal Ball, David Corn, E.J. Dionne;
Jared Bernstein; Ari Melber>

LAWRENCE O`DONNELL, HOST, "THE LAST WORD": Everyone says the
Republican leadership is just out of control crazy and they just don`t know
what they`re doing. Even some Republicans say that. And that`s one
explanation. A possible explanation for what you`re seeing in Washington.
But what if, just what if the Republicans know exactly what they`re doing
and what they`re doing is shutting down the presidency?

(BEGIN VIDEO CLIP)

UNIDENTIFIED WOMAN: It`s day seven of the government shutdown.

UNIDENTIFIED MAN: The shutdown is entering week two.

UNIDENTIFIED WOMAN: Week two looks a lot like week one.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: There are not votes
in the House that pass a clean cr.

UNIDENTIFIED MAN: They should prove it.

UNIDENTIFIED MAN: Put it on the floor Monday or Tuesday.

PRES. BARACK OBAMA (D), UNITED STATES: Call a vote. Call a vote
right now.

UNIDENTIFIED MAN: Put it on the floor and give it a chance.

OBAMA: Let the bill go to the floor and let`s see what happens.

BOEHNER: There are not votes in the House that pass a clean cr.

UNIDENTIFIED WOMAN: Except that you have more Republicans coming out.

UNIDENTIFIED MAN: There are as many as 22 Republicans.

UNIDENTIFIED WOMAN: And saying that they will support a clean cr.

UNIDENTIFIED MAN: Really?

UNIDENTIFIED MAN: Meanwhile in Washington --

UNIDENTIFIED WOMAN: The shutdown got married.

BOEHNER: The debt limit is right around the corner.

UNIDENTIFIED WOMAN: With the debt ceiling crisis.

OBAMA: The second thing Congress needs to do is to raise the debt
ceiling next week.

UNIDENTIFIED WOMAN: It makes the stake so much higher.

BOEHNER: The votes are not in the House to pass a clean debt limit.

UNIDENTIFIED MAN: John Boehner has kept saying, I want to have a
conversation.

BOEHNER: We have to sit down and have a conversation. A
conversation. A conversation. A conversation. He used the simple
conversation.

UNIDENTIFIED WOMAN: He often used the words conversation.

BOEHNER: We`ve had conversations before.

UNIDENTIFIED WOMAN: Twenty two times in that interview.

UNIDENTIFIED MAN: Republicans are acting kind of childish.

UNIDENTIFIED WOMAN: They don`t care about larger fiscal issues.

UNIDENTIFIED WOMAN: The goal posts have moved again.

UNIDENTIFIED MAN: -- Healthcare, now they are stuck.

UNIDENTIFIED WOMAN: For them, a win is --

UNIDENTIFIED MAN: Full capitulation about the president.

UNIDENTIFIED WOMAN: To have the president capitulate on something.

UNIDENTIFIED WOMAN: Is that what`s going on?

UNIDENTIFIED WOMAN: To have him pry ankle, period.

BOEHNER: It`s time for us to take a stand.

UNIDENTIFIED WOMAN: The public has to weigh in.

BOEHNER: It`s time for us to stand and fight.

UNIDENTIFIED WOMAN: It`s not enough to take a stand. In the end you
have to govern.

(END VIDEO CLIP)

O`DONNELL: The Boehner bunglers. That`s the way much of the media
sees the shutdown of the federal government. In fact, that`s the headline
of Paul Krugman`s column in the "New York Times" today which is an
indisputable presentation of the absurdity of what we`ve been watching
which Krugman ascribes to what he called the quote, "deeply incompetent
house republican leadership." The truly incompetent as Krugman wisely
points out can`t even recognize their own incompetence.

The professor goes on to refer to the House of Representatives as the
keystone cops and the Boehner bunglers. Professor Krugman may well have
the entire explanation right there in his 781 word column. Incompetence.
But there is another possibility. The one no one is considering. The one
that the appearance of incompetence is the perfect way to mask. What if
what if John Boehner and the House Republican leadership and Senator Ted
Cruz know exactly what they`re doing and exactly why they`re doing it? What
if they are playing a much longer and bigger game than anyone has noticed?

What if their concern is not how many seats, will they win or lose in
the next Congressional election? Why if their concern is, the presidency
and nothing but the presidency? And what if the Republican Party, the
party that created the modern imperial presidency during the Nixon
administration has looked at the Romney electoral results. The Romney
electoral maps.

What if the Republican Party has looked at the changing demographics
of the electorate changing in the ways that can only hurt them in future
presidential election and what if the Republican Party realizes that the
presidency is increasingly a long shot for the Republican Party and they
have decided it is time to end the imperial presidency? It is time to deny
the president wherever possible unilateral war making pirates that the
presidency has been employing since the 1960s. What if the Republicans
have decided it is time to shutdown the presidency?

(BEGIN VIDEO CLIP)

OBAMA: If we get in a habit where a few folks, an extremist wing of
one party whether it`s Democrat or Republican are allowed to extort
concessions based on a threat of undermine the full faith and credit of the
United States, then any president who comes after me, not just me will find
themselves unable to govern effectively.

(END VIDEO CLIP)

O`DONNELL: The Republicans could not defeat him at the ballot box.
And so, now they are determined to prevent the president from governing.
They are not trying to shutdown the government. They are shutting down the
presidency. They are not trying to defund ObamaCare. They are trying to
defund Obama. The only thing they are trying to defund in government is
the thing they have attached the president`s name too. The House
Republicans are on their way to passing individuals those to fund every
aspect of government except President Obama`s signature legislative
achievement.

The Republicans built the imperial presidency in an era when they
firmly believed they would never ever again have control of the House of
Representatives. The Democrat, the majority in the House of
Representatives then was huge, it was insurmountable and it was permanent.
So, believed everyone in Washington, everyone in politics, democrat and
republican, the Republicans has a fighting chance in those days to control
the Senate from time to time but they believed especially with their
southern strategy that they could approach something of the permanent hold
on the White House just as the Democrats had a permanent hold on the House
of Representatives. And so, Republicans wanted to see as much power as
possible residing in the White House but now they don`t. Now they are
building the imperial speakership.

(BEGIN VIDEO CLIP)

OBAMA: Any president who comes after me, not just me, will find
themselves unable to govern effectively.

(END VIDEO CLIP)

O`DONNELL: And so the question tonight is, are they really the
Boehner bunglers or do Republicans know exactly what they are doing?

Joining me now, former Vermont governor and DNC Chairman Howard Dean.
And the National Review`s Robert Costa, both are CNBC contributors.

Governor Dean, I don`t like stupidity or evil or incompetence as
explanations for why people in Washington do what they do. I think your
experience in mind, most of them are pretty smart about how they`re making
their choices most of the time. And when I try to find the reason in what
I`m looking at here, it seems to me that this new Republican Party no
longer wants an imperial presidency. They want to power to be in whatever
part of the government they can control.

HOWARD DEAN, FORMER VERMONT GOVERNOR: Well, I look at it somewhat
differently. I was on a talk show this morning with a Tea Party candidate
who`s going to run against Pete Sessions. He was one of the most
conservative Republicans from Texas. And her point of view was basically
she actually said the United States is not really a democracy. It`s a
representative republic or something like that. I actually think the Tea
Party fundamentally does not believe in democracy unless they`re in charge
of it. Which is a little different than saying, they just want a week in
the presidency. So, I think they are in terrible trouble. I saw a poll in
the way in here which is unbelievable.

Obama is underwater by minus six in terms of his favorable,
unfavorables, the democratic Congress is under by minus nine. The
Republicans in Congress are under by minus 44. And there is a fairly good
chance which nobody would have said it, six months ago that we`re going to
have a democratic control of the House, the Senate and the presidency after
2014. But now, you couldn`t want to do this on purpose. I`m sure there
are some people who agree with that, and the Tea Party probably does but I
doubt that John Boehner does.

O`DONNELL: Robert Costa, you have great Republican sources on this.
They are looking at the same polls that the Governor Dean sees, that we all
see about this is really dangerous for their Congressional elections
upcoming. They don`t seem to be worried about that. Are they more worried
about that inside than we think they are? Normally, when you get worried
about that, you kind of solve the problem pretty quickly.

ROBERT COSTA, CNBC CONTRIBUTOR: It`s a great question Lawrence, and I
understand your argument. And maybe I`m too close to covering the
situation. But to think there is some kind of grand design right now
especially within the House Republican conference, I don`t see it. If
anything I see confusion, I see indecision about how to move forward as the
clock ticks and the debt limit deadline approaches. I have to see Speaker
John Boehner just grappling with his own power within the conference not
able to manage many of the blocks especially the conservative, the right
slunk. And as much as maybe broadly, the party would like to diminish the
presidency in the second term President Obama. At the same time the House
does not have a coherent strategy to do that and if anything they`re in
fighting.

O`DONNELL: Well, let me just add to that point Robert and Howard, all
of these things in my view of this can be consistent, it can be consistent
that they don`t exactly know what to do next. But what is very clear is
what the president said. This kind of constant recurring crisis over
things that used to be routine is something that he is trying to protect
future presidents from suffering but it seems to me that this new
Republican, this new House Republican Party is going to want to use exactly
this kind of weaponry on this president and future presidents.

DEAN: Let me make the opposite case for just a second. You know,
what they`ve done in this incredible resistance in the House to doing
anything and just saying no is emboldened the president to do all sorts of
things. For example, the Environmental Protection Agency is about to enact
by rule. A number of things that they couldn`t do by law and so, I would
argue this has emboldened the president to continue with his agenda since
the Congress refuses to work with them.

O`DONNELL: Let`s listen to some of the dissent that is going on
within the Republican Party now. Representative Charlie Dent of
Pennsylvania.

(BEGIN VIDEO CLIP)

REP. CHARLIE DENT (R), PENNSYLVANIA: I would say Senator Cruz and
those who insisted upon this tactic that we all knew that was not going to
succeed. What he did essentially, Senator Cruz basically he took a lot of
folks into the ditch. Now that we`re into the ditch, you know, we can`t
get out of the ditch, the Senator has no plan to get out of the ditch.
Those of us who do have a plan to get out of the ditch, will vote to get
out of the ditch, well then be criticized by those who put us in the ditch
in the first place.

(END VIDEO CLIP)

O`DONNELL: Robert, to your knowledge, have there been any House
Republican meaning in which the speaker or anyone else has raise the issue
of how does this affect them in the next Congressional election?

COSTA: Very much so. In fact, I spoke recently with Congressman Ted
(ph) and many other pragmatist Republicans within the House. And they met
with Speaker Boehner last Wednesday and Thursday and they told them they
don`t want to see a default and they want to end the shutdown because when
they look ahead to 2014 they think Republicans as much as they argue
internally will not shoulder the blame, they think they`ll very much
shoulder the blame, especially in those suburban modern districts and the -
- countries of Philadelphia and elsewhere but that message just as getting
across of the conference I think that`s a problem for Boehner.

O`DONNELL: Let`s listen to what the president said about what the
continuing resolution that they`re struggling over actually really is.
Let`s listen to this.

(BEGIN VIDEO CLIP)

OBAMA: The bill that is being presented to end the government
shutdown reflects Republican priorities. It`s the Republican budget, the
funding levels of this short term funding bill called the cr is far lower
than what Democrats think it should be. Nevertheless, Democrats are
prepared to put the majority of votes on to reopen the government. So,
when you hear this notion that Democrats aren`t compromising, we`re
compromising so much willing to reopen the government, at funding levels
that reflect Republican wishes don`t at all reflect our wishes.

(END VIDEO CLIP)

O`DONNELL: Howard Dean, that is a perfect description of how
Republicans constantly move the goal posts and I haven`t seen what the
successful democratic strategy is and response to that moving to the goal
post.

DEAN: Well, I think you`re seeing -- I agree with that, you know,
and back in the last session in Mitch McConnell said, the only thing he
cared about was getting rid of the president before his second term. You
know, I thought that he was really a guy that didn`t know how to take yes
for an answer. And that`s what the president was making all kinds of
concessions. So, you know, basically this continuing resolution includes a
sequester money. So, it really is a republican budget. I`m actually
somewhat surprise some of the Democrats in the House have agreed to do it.

You know, I think the President looks very strong here. I really do.
You cannot tie a policy matter to whether you`re going to pay your debts.
The fact is that this Tea Party people and John Boehner and the Republican
caucus allowed this cr to go forward before and supported it. So it`s
their budget. So then to turn around and say, well, we`re not going to
pass the budget that we`re not going to pay the debts that we incurred
because we didn`t get our way in Obamacare, that`s just not going to play
with the American people. And if you think this is rough, way to the 17th
of October, 19th of October two days later, I guarantee the Dow will be
down 2000 points and everybody Democrat and Republican elect and a huge
hits on their 401k. And I don`t think the president is going to get the
blame for that.

O`DONNELL: Howard Dean and Robert Costa, thank you both very much for
joining me tonight.

DEAN: Thank you.

O`DONNELL: Coming up, the plan for the shutdown has been months in
the making. And the Koch Brothers approved of it right from the start.
David Corn and Krystal Ball will join me on that one. And what harm a U.S.
-- default as Howard Dean was just saying. What harm that to do to the
United States and the world? And in the Rewrite, I will show you just how
easy it is, so easy to rewrite what John Boehner says to make the truth.

(COMMERCIAL BREAK)

O`DONNELL: So, who came up with the Republican idea to defund
ObamaCare? I hope that you`re not surprised when you discover that the
Koch Brothers were involved. That`s next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: I don`t want the government to shutdown. I
have said that throughout.

(END VIDEO CLIP)

O`DONNELL: A "New York Times" report reveals that today`s shut down
actually is part of a month`s long strategy to tie government funding to
defunding ObamaCare. Michael Needham, the CEO of the conservative group
Heritage Action for America actually told the "New York Times," we felt
very strongly at the start of this year that the House needed to use the
power of the purse. Behind the republican purse strings are the Koch
Brothers who have been deeply, quote, "deeply involved with financing the
overall effort and have distributed millions of dollars through their
various organizations."

The "New York Times" writes a defunding tool kit created in early
September included talking points for the question, what happens when you
shutdown the government and you are blamed for it? The suggested answer
was the one House Republicans give, we are simply calling to fund the
entire government expect for the Affordable Care Act ObamaCare.

(BEGIN VIDEO CLIP)

CRUZ: Do I does anyone here want to shutdown the government and the
answer is absolutely not. We should not shutdown the government. We
should fund every bit of the government. Every aspect of the government.
One hundred percent of the government except for ObamaCare.

(END VIDEO CLIP)

O`DONNELL: Joining me now, MSNBC`s Krystal Ball and David Corn,
Washington bureau chief from Mother Jones and an MSNBC political analyst.

Krystal, there is Ted Cruz saying pretty much word for word, the
talking points as developed by Koch Brother`s funded team that`s came up
with the strategy in the first place.

KRYSTAL BALL, MSNBC CO-HOST, "THE CYCLE": Yes, they certainly found a
willing partner there. And they actually talked in this article too about
for a while, they felt like that they were spinning their wheels. They
were not getting the aggressive defund ObamaCare movement that they wanted.
And I think the two key ingredients that they eventually got over the
summer that lead to the situation we`re in now was Ted Cruz being willing
to make this sort of argue a true conservative or argue with squish kind of
an issue.

And then they also agree with the tool kit that you were mentioning at
whipping up this frenzy among the base. Using these simplistic talking
points in saying, you know, we sent you there to get rid of ObamaCare which
you told us is the worst thing ever happened to the country, so what are
you doing about it? And using that outside money, that`s how we ended up
in this mess that we`re here in now.

O`DONNELL: David Corn, you know, what I always expected to see after
the Affordable Health Care law was passed that it would have to compete in
the future with other budget items and other budget items that are of
interest to the same constituency and to Democrats. So, for example,
whenever there`s going to be a big kind of deficit reduction bill. All
sorts of things get put on the table. Like Medicare, Medicaid, and
Democrats have cut them in the past. And one of the items that Republicans
could put on the table in something like that is exactly how much subsidy
money should go into the Affordable Care Act that sort of thing, and they
could overtime pick away at it if they wanted to get in and do the real
legislative work of that kind of thing. Instead they have gone for this
impossible to achieve just wipe the whole thing out.

DAVID CORN, WASHINGTON BUREAU CHIEF, MOTHER JONES: As if it never
happens, let me tie this segment together with the one you just did.

O`DONNELL: Please do. That would be great because I can`t do that
myself.

CORN: I`ll do that for you Warren, it`s no problem. No extra charge.
You know, you asked if there was a grand Republican plan to destroy the
presidency, what we saw with the "New York Times" story that you cited in
this segment, and what, you know, reporting that I did a couple of weeks
ago on group called Groundswell is that there was not a Republican plan.
There was a right wing plan. A conservative plan from the very get go to
get this all ginned up. And if you remember back in March, there were a
couple of Tea Party members of the House. Before Ted Cruz is a household
name to try to get these attached defunding ObamaCare to a cr that was
being debated back in March.

In that time, you got maybe the 16 House members that supported this
and John Boehner and the whole House leadership would have nothing to do
with it. So, within the next few months, because it was ginned up on the
right with Koch money and with all the grassroots, and eventually Ted Cruz
took this on became an issue that flooded, inundated the Republican
leadership whether they wanted it or not. And that really comes about
because there is this hidden infrastructure out there that`s just hammering
away day and day night, they have their friends on the hill and they really
a very dubious with the other conservatives. But they just don`t let up
and they have lots of money and more importantly, they have the grassroots
base.

BALL: Right.

CORN: They have their ear more than John Boehner does. And that`s
why Boehner turned tail.

BALL: Yes. And Lawrence I think David makes a great point because
that`s what`s different here. We`ve had money in politics forever. But
this isn`t just, you know, if you do what we want you to do we will
contribute money to your campaign or if you don`t do, then maybe we will
run some ads against you. As David is saying, they are the ones with all
the influence among the base. It`s not really the outside groups that
these congressmen are fearing. It is the rabid Republican base in their
districts coming up and showing up at their town halls and screaming at
them and it is the Tea Party challenge from the right that these groups
would also fund.

O`DONNELL: And David --

CORN: Listen, you can`t count on outside groups anymore either.
They`re not outside --

BALL: Right.

CORN: They are really controlling what`s going on in the inside.

BALL: Right.

O`DONNELL: And David, there used to be a center of both parties that
resisted the impulses that were coming from the left edge of the Democratic
Party and there was also by the way a conservative edge of the Democratic
Party represented by southern senators that we no longer have. And just
like the Republican Party used to have these different factions. But the
centers of each party used to end up kind of pushing back, creating counter
forces against those edges, there seems to be no counterforce whatsoever to
this thing you describe as being several months ago just a handful.
There`s no counterforce to prevent it from taking over.

CORN: Well, for a couple of reasons, John Boehner has absolutely no
leverage over this radical band of Jacobins within his own party. These
people care more about being primaried from the right because of
gerrymandering that gave them the Republican majority. They worry about
Koch money. They don`t want it, they don`t want it against them. They
don`t care about being chairmans of committee like when you were working on
the hill that`s what everyone want it. They don`t care because they don`t
want to do governance, they don`t believe in governance, so they don`t care
about that.

And it`s all about getting on, you know, TV, websites, getting
involved, you know, with twitter and social media. And so, there are no
earmarks. So Boehner has no powers of personal or political ideological
persuasion and he has no sticks anymore to use. So, these people are
really running wild and it`s maybe time for the moderates, Peter King is
talking the game but he`s really willing to put his neck on the line with
the bunch of others and have the real fight here. So far, no, and so the
battles going to the people who care most about the fight.

O`DONNELL: Krystal Ball and David Corn, thank you both very much for
joining me tonight.

BALL: Thanks, Lawrence.

CORN: Sure thing.

O`DONNELL: Coming up. What catastrophe really looks like if we don`t
raise the debt ceiling and in the Rewrite, what John Boehner got wrong
about the history of the debt ceiling?

(COMMERCIAL BREAL)

O`DONNELL: In the Spotlight tonight, the looming debt limit deadline.
Beginning in 1917, the statutory limit has restricted the total federal
debt and since that time the United States Congress has voted to raise the
debt limit over hundred times. It went up 18 times under President Ronald
Reagan. Nine times under President George H.W. Bush. Six times under
President Bill Clinton and seven more times under President George W. Bush.

Now, let`s sit back and enjoy this c-span video montage of the
horrible fights on the House and Senate floor over raising the debt ceiling
during the Reagan years, the Bush years, the Clinton years and the Bush
years again.

Yes, there is no footage of c-span debt ceiling wars under Presidents
Reagan, Bush, Clinton and Bush because, of course, raising the debt ceiling
was never, not for one day, in doubt in those days. And never even
slightly controversial. In less than two weeks, the United States treasury
could fail to meet all of its financial obligations for the very first time
in our nation`s history because of the debt ceiling.

Back in 2011, the country got a hint of what could happen as Congress
came to the edge of the fiscal cliff. Our credit rating was downgraded,
the stock market fell nearly 17 percent, and monthly payment on the
mortgages went up an average of $100. The U.S. treasury department issued
this warning just last week about the new debt limit fight.

Not only might the economic consequences of default be profound, those
consequences include high interest rates, reduced investment, higher debt
payments and slow economic growth. Could last for more than a generation.
However, not everyone seems to be convinced that debt default would bring
some kind of economic problem to this country or the world.

Congressman Ted, this is his real name, Yoho, a tea party freshman and
a large animal, large animals only, large animal vegetarian, a
veterinarian. Large animal veterinarian actually said this.

I think personally, not raising the debt ceiling would bring stability
to the world markets.

Joining me now, MSNBC`s contributor and columnist for "the Washington
Post," E.J. Dionne, and MSNBC analyst and former economic advisor to vice
president Joe Biden, Jared Bernstein.

E.J., in the past, there were plenty of members of the House of
Representatives who did not understand the debt ceiling. They were
instructed on how to vote for it by their leadership. One of the
traditions being, if you were in the party in power, you kind of have to
vote for it. If you are not in the party in power, you can sit on the
sidelines and watch others vote for it raise the debt ceiling.

But now, you have this large animal veterinarian in the House of
Representatives who actually has no idea that not raising the debt ceiling
could cause any problem anywhere in the United States or the world.

E.J. DIONNE, COLUMNIST, THE WASHINGTON POST: Well, I don`t think you
should take this one large animal veterinarian to speak for all of them. I
bet there are some out there who understand what the consequences that this
could be.

The first thing to say, I think, is because Congress has never been so
stupid as to take this risk, we don`t fully know what all the effects would
be. But it certainly wouldn`t be pretty. I mean, Ben Bernanke has said it
would be a recovery ending event. And you know, when I hear some of the
conservatives, well, the government could just cuts spending here and just
pay the creditors, imagine the government paying all of this money to a
sovereign fund in China or the Gulf, while it says to the lady down the
street, but we can`t pay your Social Security check. In order to keep
things bubbling along, they might have to cut government spending by some
estimates for 40-45 percent. There could be one on the dollar.

I mean, this is crazy to take this risk. And you are very right.
People say Obama voted against it. That`s it when you increase, yes. When
you are in the opposition party, you let the other guys do it but no one
threatened not to do it. And that`s why this is so very different.

O`DONNELL: Yes, Jared. It would be a lot better for the president
today if he had voted for the debt ceiling that one chance he had to do it
as a senator. But, as we all knew and knew at the time is those were throw
away voted because it was never a risk, it was never in danger. And if for
some reason, they ever develop some kind of problem, both party leaders,
both bodies would have come together and made sure they have the right vote
count for passing the debt ceiling. But those days are long gone.

JARED BERNSTEIN, MSNBC CONTRIBUTOR: Right. I mean, it was a bad
vote. But the point is that the debt ceiling was going to be raised. And
in fact, it was raised with little fun fair at all.

Let me just amplify some of these points you guys are talking about
needs to be the impact on the economy. It`s true that we don`t know that
exactly what it will do. But I don`t know exactly what would happen to me
if I jumped off the roof of this building because I never did it. But I
bet you it would be really terrible.

So, look, I mean, if you think of the bond market, every economist you
can talk to, except for maybe Mr. Yellow, every economist you can talk will
tell you that interest rates will rise, OK? Because anyone who is even
thinking about lending money to someone who even got close to a default
would insist on a risk premium, a higher interest rate.

Also, think about this in terms of growth. So now, you have kind of
screwed up the bond market. Now, think about this in terms of growth. You
couldn`t pay the debt service on the deficit any more. So, we would have
to cut spending by something like $600 billion pretty quickly if this
dragged on at all. That is about four percent of GDP. And that`s what Ben
Bernanke means. This would take recovery into recession.

So yes, recovery ending event, bad for the bond market, bad for the
stock market, terrible for the economy which by the way isn`t doing great
anyway.

O`DONNELL: E.J., the debt ceiling or debt limit has a bad name. It
meaning debt limit sounds like a good thing. It sounds like you should
have a limit on debt. And you should be extremely reluctant to change that
limit in an upward direction. I think we can thank Ben Bernanke for giving
drama to that fiscal cliff drama that we all went through. Without that
cliff attached to it as Bernanke did, without that little verbal trick, it
would have been very hard to express to people that something dangerous was
coming. And I think there is obviously something inadequate in the
language of the debt ceiling discussion for us, scaring people out there,
and making them realize that they have some serious risks in this if they
have mortgages and car loans and any kind of real economic life.

DIONNE: Yes. Now, it`s a terrible name and a terrible idea. I mean,
we should get rid of it because a lot of people hear this and they say this
will put some restraint on the future debt that the country takes on, no.

Congress has already voted for programs they have already sort of
committed to borrowing this money. So the debt ceiling is only a
declaration that we will actually pay our debts. And it would awfully nice
if one result of the crisis is if Congress would abolish the whole idea of
a debt ceiling all together. Congress will vote when it wants -- when it
passes a budget about how much money is going to borrow, if it is going to
borrow money and not only that.

It is an antiquated terrible idea. And it then leaves us in the
situation where one party can use it to hold up the other party or threat a
financial catastrophe.

O`DONNELL: Go ahead, Jared.

BERNSTEIN: I mean, I guess, you know, the thing that comes to mind
just in listening our conversation is that when did we stumble into a
politics that creates massive problems like this? I mean, we actually have
a world and economy as the Saudis (ph), with serious existing problems. We
can talk about climate. We can talk about guns. We can talk about
inequality and unemployment and jobs. E.J. writes about this stuff all the
time, Lawrence. You feature about it.

We`re not talking about resolving problems. In fact, I actually, at
this point, I would like Congress to take Hippocratic oath. We just won`t
make things worse. But this is the Congress that lurches from one self-
inflicted wounds to another. And when you talk about breaching the debt
ceiling, that is like going from a mosquito bite to a shark bite.

O`DONNELL: Well, Jared, thanks you. You have queued up the rewrite
perfectly which will answer exactly that question of when did we stumble
into these politics where we are creating our own problems. I will answer
that.

E.J. Dionne and Jared Bernstein, thank you both very much for joining
me.

DIONNE: Thank you.

BERNSTEIN: Thank you.

O`DONNELL: And as I say, coming up in the rewrite, it`s going to be
all about John Boehner and all about how this Congress decided to create
its own problems.

And a new poll shows 24, 24 House Republicans are now vulnerable in
the next congressional election, all thanks to the shutdown and that is
more than enough seats for the Democrats to take over the House. That is
coming up.

(COMMERCIAL BREAK)

O`DONNELL: In tonight`s rewrite, I will show you exactly how many
words in a John Boehner sentence you have to change to make it true.
That`s next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Every president in
modern history has negotiated over debt limits. Debt limits have been used
to force big policy changes on Washington.

(END VIDEO CLIP)

O`DONNELL: Now, to make that a more accurate statement requires just
the slightest, slightest rewrite and it would be this.

No president in modern history has ever had to seriously negotiate
over a debt limit. Debt limits have never been used to force big policy
changes in Washington.

There it is. That`s all you have to do to make John Boehner`s
statement actually true. It is easy as that, easiest rewrite ever. OK, we
are done. I`m going home.

OK. Well, actually, it is a little more to say about this. Raising
the debt ceiling was never difficult before john Boehner`s House of
Representatives. Raising the debt ceiling was never once seriously in
doubt before John Boehner`s House of Representatives. Yes, there are some
stories in the past of people trying some stunts with the debt ceiling but
did not work. But they never created a minute of doubt that the debt
ceiling would be raised, including that stunt made by Ted Kennedy and
Walter Mondale to attach campaign finance reform to 1973 debt ceiling
increase.

As "the Washington Post" reported, the Kennedy-Mondale effort was
criticized by commentators and fellow lawmakers for using a shotgun tactics
to try to hitch their pet cost to emergency must-pass legislation.

What has happened many times over the years is that a debt ceiling
increase has been included as a non-controversial and unnoticed item in a
larger legislative vehicle. The debt ceiling was not forcing the big
policy changes that might be in some of those bills. It was simply riding
quietly along in the baggage compartment of those bills unseen by almost
everyone.

Now, amateurs who look at technical legislative histories of bills can
be easily misled by the word amendment because parliamentary procedure
involve the senate and the House can be almost indescribably complicated as
I know about to demonstrate.

When you look at a legislative history, that shows that debt ceiling
was what the parliamentarians called, the underlying vehicle to which an
amendment or a series of amendments were attached. It might look like the
Senate was unwilling to pass the debt ceiling without those amendments.
But in fact, at the time, probably most of the senators had no idea that
the debt ceiling was the underlying vehicle, the chassis on which these
amendments were sitting. That they were all debating. In fact, major
legislation is very frequently handled in the form of amendment, a leader`s
amendment to something. And a lot of times members of the Senate don`t
even know what the something is.

If you`re playing very close attention on c-span, you may not realize
that the amendments are to a virtually invisible underlying bill. And what
makes underlying bills invisible is both the procedural slight of hand,
which is intentional, and the underlying bill of being utterly non-
controversial like say, a debt ceiling increase.

Before Speaker Boehner, the debt ceiling was so non-controversial that
most political reporters and most political pundits and most members of
Congress had never used to the phrase in a sentence. And many of them, if
not the majority, did not understand it which is why on the night the
Republicans won the House of Representatives and assured John Boehner`s
rise to the speakership, there was exactly one commentator on television
who predicted that John Boehner was going to face a serious challenge when
it came time to raise the debt ceiling.

(BEGIN VIDEO CLIP)

O`DONNELL: The single most important vote ever cast by members of the
House and the Senate and that is on the debt ceiling. Our debt ceiling is
now $14.3 trillion. It will need to be raised in the coming year. This,
by the way, is a challenge for Boehner and the House, his worse challenge,
he must and he know it, pass a debt ceiling increase in his Republican
House of representatives.

(END VIDEO CLIP)

O`DONNELL: Now, that guy didn`t have to be particularly bright to
make that prediction. He just had to know what the dealt ceiling is and
most pundits didn`t. And they didn`t know it for a very good reason. It
was a completely non-controversial virtually invisible element of our
government.

I worked in the Senate for years before I even knew about the debt
ceiling. And I might have never known about it, I might have left the
building without knowing about it if I haven`t gotten promoted into an
eventually being in-charge of the staff of the Senate finance committee
where we actually had to write debt ceiling increases into law.

So, John Boehner cannot be allowed to pretend that the madness that he
is allowing to run rampant is something that every president in modern
history has had to contend with.

(BEGIN VIDEO CLIP)

BOEHNER: Every president in modern history has negotiated over a debt
limit. Debt limits have been used to force big policy changes on
Washington.

(END VIDEO CLIP)

O`DONNELL: No, no, no, no, no. Not true.

There is exactly one speaker of the House in modern history who has
seriously tried to negotiate over a debt limit. Debt limits have been used
to try to force big policy changes in Washington by exactly one speaker of
the House. And that speaker of the House is not speaking the truth about
the debt ceiling. Here, once again, is the truth, the real truth about the
debt ceiling.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is something
routine. It has been done more than 40 times since Ronald Reagan was
president. It has never before been used in the kind of ways that the
Republicans are talking about using it right now.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

O`DONNELL: A new poll shows how Democrats can win back the House of
Representatives, that`s next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JACK LEW, U.S. TREASURY SECRETARY: The shutdown is harming people
every day. I think we`re sing that in the kind of ironic actions of those
who chose to shut the government down, item by item, trying to reopen the
government for things as they discover that there is real pain out there.

UNIDENTIFIED FEMALE: The shut down can go on as long as it wants
because it is politically advantageous?

LEW: There are no winners there.

(END VIDEO CLIP)

O`DONNELL: A new public policy polling survey from moveon.org shows
Republicans in 21 House districts would lose their seats if elections were
held today. The polling shows that the Republican incumbent losing a head
to head contest with a generic Democratic challenger, no name, just
Democratic challenger in 17 districts, some in crucial election
battleground states like Colorado, Pennsylvania, Michigan, Iowa, Ohio and
Florida. Other endangered seats are in traditionally Democratic states
like New York and California.

Democrats picked up four more districts in Virginia, California and
New York when the respondents are told that the Republican incumbent
supported the government shutdown.

Joining me now is Ari Melber, co-host of MSNBC`s "the Cycle."

Air, rarely do you see a congressional campaign so clearly laid out on
an issue as you see here for the Democrats to go after Republicans on the
shutdown.

ARI MELBER, MSNBC HOST, THE CYCLE: Yes, Lawrence. I think there are
two pieces to this. One is the numbers, the other is corruption. On the
numbers, you have the House districts you mentioned, you have 17
Republicans in districts that Obama won and another 17 in districts that
Romney won by less than three points. So, these areas that were already
contested, if you will, under the old situation. And as you point out, the
shutdown has fundamentally change that.

Where we are headed now in the brinksmanship over the debt ceiling
goes to something deeper that I think is way beyond political differences.
And that is corruption, these Republicans, some of them, using their office
and what I think is a fundamentally corrupt way and part of what you talked
about tonight in the historical change over the debt ceiling in a way that
is not governing but is blackmail. And if that message gets out, just as
the shutdown concerns or getting out, it could fundamentally change what we
think of as the political balance in some of these races.

O`DONNELL: Ari, where if not for the constitutional privileges that
they have as members of Congress, what you`re talking about, it is in
business? And other areas considered extortion?

MELBER: It really is. And you think about, I mean, sometimes we
looked at business as the sort of wild or unregulated area, but there are
better rules on executives in this regard than there are in members of
Congress. One is (INAUDIBLE) duty, the idea that you cannot simply act
against the best interest of the company you work for. You cannot, for
example, deny it the right to make a or the ability to make a profit.

Well, here, what you have in very real way, Lawrence, is these members
of Congress abusing their positions of power. I`m fine with them wanting
to spend less in the future. That is all about the budget that you create
for the future. But trying to risk default and use that as mechanism of
hostage taking is fundamentally different. And I do think, I really
believe this. If this gets out, if we get close to the line, let alone
over it, I think a lot of people around the country will not just see that
as left, right or quote-unquote "Washington." They will see that as
Republicans out of control.

O`DONNELL: Ari, how long do the Republicans in danger on that list in
that poll stay in line with John Boehner?

MELBER: Well, that`s the big question. And I think you see that in
John Boehner`s dishonesty about the state of play when he says well, I
don`t believe. Boehner doesn`t believe that he has the votes. What he
means is he doesn`t believe his caucus. That either he is lying or the
Republicans are lying because as you and others have reported, there are a
sufficient number of Republicans to at least then the shutdown. And
historically, there have been a sufficient number to raise the debt ceiling
on a clean vote.

So, I think the time runs out not on these people as they are looking
to be cowering and hiding behind not letting democracy work on the House
floor. That`s a dangerous place to be as a candidate. Although, a lot of
these raises have a long time to go.

O`DONNELL: The closer, Ari Melber, gets tonight`s "Last Word."

Thank you, Ari.

MELBER: Thank you.

O`DONNELL: Chris Hayes is up next.

END

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