updated 10/16/2013 12:21:17 PM ET 2013-10-16T16:21:17

ALL IN with CHRIS HAYES
October 15, 2013
Guest: Chris Murphy, Jon Tester, Debbie Wasserman Schultz, Lizzie O`Leary,
Blanche Lincoln, Tim Carney, Ezra Klein

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

And it`s been an insane day in Washington. Just 48 hours before the
U.S. government will hit its debt ceiling, there is total complete chaos in
the House of Representatives at this hour, and an uncertain future for how
exactly this country will prevent a first of its kind default.

A deal offered by Speaker John Boehner to reopen the government and
lift the debt ceiling, one that would have replaced a bipartisan Senate
plan that House conservatives didn`t like, one that was supposed to be
voted on by the House tonight as I speak to you, that deal has now been
nixed. It`s been nixed by the right wing Heritage Action and House
conservatives, and the House has been postponed indefinitely.

Republican leadership in the House appear to have no idea what to do
next and there is no good reason to believe anyone knows what will happen
next. The House measure that was to have voted on would have funded the
government through December 15, extended the debt limit to February 7 and
ended employer contributions to health insurance for members of Congress
and their staff, the White House and its staff as well as cabinet members -
- in this case, government contributions since the government is the
employer.

But as that made its way to the House Rules Committee, Heritage Action
urged members to vote no and not long after, a vote on it was killed. An
extraordinary turn just 24 hour after we thought we had a deal coming from
the Senate.

(BEGIN VIDEOTAPE)

UNIDENTIFIED FEMALE: Here is another layer of gamesmanship to the
drama playing out in Washington. A reliable Web site that covers Capitol
Hill reports that Senator Ted Cruz of Texas convened in a secret meeting
last knight. Cruz summoned 15 to 20 House Republicans to the basement of
this Mexican restaurant.

UNIDENTIFIED FEMALE: They were reportedly discussing how to respond
to a potential budget deal in the Senate.

UNIDENTIFIED MALE: The 15 for 20 minutes are certainly members who
met at Tortilla Coast are certainly members who don`t seem like they will
support any measure like this.

HAYES (voice-over): Fresh off news of bipartisan deal in the Senate,
Senator Ted Cruz gathered his deputies at the Tortilla Coast restaurant on
Capitol Hill where Monday night is enchilada night.

UNIDENTIFIED MALE: I just hope the solution to this problem
ultimately is known as the Tortilla Coast accords.

HAYES: According to "Roll Call," the secret talks centered on how to
deal with an unpalatable agreement in the Senate, an agreement that
basically means temporary reopening of the government and a short term
increase of the debt ceiling.

Republican Congressman Tim Huelskamp who was with Ted Cruz for
enchilada night told "The New York Times", "Anybody who would vote for that
Senate deal in the House as a Republican would virtually guarantee a
primary challenger. Following the clandestine meeting in the basement of
for Tortilla Coast, House Republicans met to see what Speaker John Boehner
had planned.

We know the morning meeting began with funeral parlor owner-turned-
congressman, Steve Southerland of Florida, led his fellow Republicans in
singing "Amazing Grace."

With the tone set, the speaker announced his plan, which was
essentially the Senate deal, plus a two-year delay to the medical device
tax, and the Vitter Amendment, which amounts to a salary cut for lawmakers
and their much less well-compensated staff. Immediately after the speaker
unveiled his plan, he clarified there was in fact no plan.

Two days before a possible unprecedented default and the speaker has
no idea what he`s doing.

Democrats who fashioned the compromise were furious.

SEN. HARRY REID (D-NV), MAJORITY LEADER: We felt blindsided by the
news from the House.

HAYES: As Nancy Pelosi pointed out, the speaker didn`t even have the
votes.

REP. NANCY PELOSI (D-CA), MINORITY: They don`t have the votes for
what they have today. They have their own internal combustion.

HAYES: What looked yesterday like a solution, today has been
sabotaged by the House. And on top of that, "Politico" reporting that
House leadership is still considering sending lawmakers home after a vote
tonight, a bid to try to force the Senate to accept the House`s bill.

(END VIDEOTAPE)

HAYES: One Senate Republican aide placed the blame on a particular
senator from Texas, Ted Cruz and his Tortilla Coast Republicans are leading
us to a default.

NBC News has learned that a bipartisan group of 14 senators met this
evening at the office of Senator Susan Collins to try to come up with a
plan. Meanwhile, Senator Reid and Senator McConnell had reengaged in
negotiations and are optimistic an agreement is within reach, according to
Reid`s spokesman.

Joining me now is Senator Chris Murphy, Democrat from Connecticut.

Senator, what is the state of play as far as you understand it? What
communications must be given to senators about what`s going to happen in
the next 28 hours?

SEN. CHRIS MURPHY (D), CONNECTICUT: You couldn`t make this up. I
mean, this has just gone from bizarre to ultra-bizarre. You hear of that
singing of "Amazing Grace" in the Republican caucus, it sounds like
something you do before you all sit around and drink Kool-Aid.

This is not OK what`s happened in the House, but it has, of course,
provided the Senate with an opportunity to essentially try to be the adults
that finished this deal off.

So, Reid and McConnell are back talking today about essentially a
straight forward reauthorization of continuing resolution for three or more
months, and an extension of the death ceiling that would parallel that
amount of time.

You know, I guess that`s as good as we are going to get. Ultimately,
though, it`s going to depend once it passes the Senate, which I think it
will on John Boehner making a choice --

HAYES: Right.

MURPHY: -- between protecting himself and protecting the world
economy. It`s pretty clear now there`s just no way, Chris, that the House
Republicans can deliver votes for anything. This is ultimately going to
have to be House Democrats and a handful of moderates.

HAYES: So, I just want to make sure that people are tracking this,
because there`s been a lot of twists and turns. Basically, the House tried
to come up with its own version today of some kind of face saving measure
which had -- by the end, it was whittled down to one demand which was to
screw over their staff, which was to make their staff pay more out of
pocket for health insurance.

So, two weeks of government shutdown, roiling of global financial
markets, hundreds of thousands of people furloughed, all of the cascading
misery from cancer trials to people on WIC, to people on food stamps, all
of that so they could give their staff a pay cut. That was apparently what
we were learning today.

Now, there is no demand and all there is, is what you cook up in the
Senate -- and then what?

MURPHY: Yes, well, that`s the question. I mean, listen, we have
never been arguing over whether there`s a solution to this crisis that has
the majority of votes in the senate and the majority of votes in the House.
We have always known that a straight forward C.R. and likely a straight
forward increase of the debt limit would get the majority votes in both
places. We have always just been arguing over whether John Boehner is
willing to bring that to a vote in the House.

And so, that`s what this is all about. It`s about the psychology of
one man and whether he is willing to put at risk his speakership by
cobbling together a deal that will get the votes of Democrats and a handful
of Republicans.

And, ultimately, he`s going to have to make a decision tomorrow. He`s
going to have to make a decision as to whether he`s going to abandon the
Tea Party or whether he`s going to collapse the global economy, because we
will able to get a deal in the Senate. I`m confident of that. The
question is simply going to be whether Boehner will call it.

HAYES: One procedural wrinkle there, if Ted Cruz and Mike Lee for
instance want to throw up road blocks, I mean, we`re dealing on a short
calendar here, we don`t have much time and things do not move quickly in
the Senate. Can they grind the process out? Can they slow you down? Can
they filibuster, for instance?

MURPHY: Yes, I know, that`s a great question. So, we are at a point
in the process where we need unanimous consent to move forward. We need
all 100 senators to agree to an expedited time frame.

If we don`t get that, then if we start a bill being debated on the
Senate floor, it will likely be the weekend before it gets a vote.
Obviously, the global economy will have collapsed by then. So, Ted Cruz
and Mike Lee have to make a decision like Speaker Boehner has to make that
they`re finally going to put their ideology back in their suitcase and
allow for this vote to happen. I think Ted Cruz essentially by himself
stopped the process in the Senate of moving forward in an expeditious
manner and dealt with the consequences to the economy, that likely would be
taking it even too far for him.

HAYES: Well, we will find out tomorrow in the next chapter of this
bizarre and terrifying unfolding drama.

Senator Chris Murphy of Connecticut --

MURPHY: Thanks.

HAYES: -- thank you so much.

Joining me now Senator Jon Tester, Democrat from Montana.

And, Senator, one of the things I have seen play out in these two
weeks is that there was a strategic assumption on the part of Republicans
that if they could hold the line, they would force Democrats in the House
and more likely in the Senate from red states, from states that Mitt Romney
won to come over to their side, to look to compromise, to look to do things
to Obamacare, to delay it, to muck with it in certain ways.

That didn`t happen, you`re one of those people, you`re a Democrat that
represents one of the states that Mitt Romney won.

What has been your thinking about this for the last two weeks?

SEN. JON TESTER (D), MONTANA: Well, first of all, Chris, I just came
through a very difficult race in 2012 and I can tell you that Obamacare was
not the biggest issue in that race by any stretch of the imagination. So,
they -- I`m not sure that they went out and assessed the landscape as
careful as they should have.

Secondly, I think what we have seen particularly today is just a
continuation of a totally dysfunctional House, that`s being led by some
hard right wing folks that really don`t care about the economy of this
country. In fact, would sell the economy out if it meant political gain
for them. And I think that`s very, very unfortunate, very irresponsible
and I think this kind of political grandstanding has to stop, the speaker
needs to show some leadership qualities. We need to get the debt limit
increased, we need to get the government running again and move this ship
down the road so we can start paying our bills with an economy that`s
vibrant, not one that`s being depressed.

HAYES: How does this play in Montana? How has this been playing in
Montana?

TESTER: It hasn`t been playing well, I`ll tell you that. The
Republicans in the House have gotten beat up pretty bad by the actions that
they have taken over the last three weeks. And quite frankly, rightfully
so.

So, it hasn`t been playing well at all. People are sick of the
political gamesmanship.

HAYES: If the House had passed this bill tonight which collapsed
which had this one demand, this Vitter Amendment this idea that you
wouldn`t let the federal government pay any employee contribution for
members of Congress or their staff, would you have intended to vote for
that, or would have voted that down in the Senate?

TESTER: There`s no way I`m going to vote for that. The bottom line
is that the person that`s answering phones in my office that`s making
30,000 bucks a year needs that benefit or they would be in trouble.

I do look forward, though, Chris, all those folks over there in the
House of Representatives who don`t want to have is that benefit, giving
that benefit up when this debate`s over with.

HAYES: They don`t have to vote on it, I`m sure they could just refuse
that as part of your compensation.

TESTER: If they don`t want it, they can refuse it and if that`s what
they feel it needs to be done, they can do that. And in the meantime,
hopefully, the folks in the Senate can get together as adults and work to
move this economy forward because it`s obvious that the House`s main goal
through this whole process was to sink the economy.

HAYES": Senator Jon Tester of Montana, thank you so much.

TESTER: Thank you, Chris.

HAYES: Joining me now, Congresswoman Debbie Wasserman Schultz,
Democrat from Florida, chair of the Democratic National Committee, author
of the new book out today, "For The Next Generation: A Wakeup Call to
Solving Our Nation`s Problems", which is a strange title on a day like
today.

OK, what happens -- first of all, were you amazed by what happened in
the House? I mean John Boehner, the speaker, cannot get 218 votes for
anything. He cannot cobble together 218 votes for anything.

If I -- it`s a wonder the man is even speaker.

REP. DEBBIE WASSERMAN SCHULTZ (D-FL), DNC CHAIR: Well, you know, what
is clear now and there was -- I was reserving judgment up until this point.
When they pulled the Rules Committee down tonight and then sent out a
notice that we`re not going to have votes tonight at all, it`s very clear
that the hard-core Tea Party Republicans that are controlling and have a
stranglehold on John Boehner and their agenda don`t have a firm grasp of
reality. They have become unhinged. And I don`t say that lightly, Chris.
I mean --

HAYES: Yes, what do you mean by that? Because I feel like people use
that term all the time in politics and I`m always wary of it, because it`s
a way of saying that the people don`t believe like us are crazy, they`re
outside the bounds of rationale conversation. What do you mean by that.

SCHULTZ: I`m not saying they`re crazy, I`m saying they`re ignorant.
They don`t have a firm grasp on reality that -- because -- like the climate
deniers that insist that the -- that the temperatures are not warming, we
have a hard-core Republicans who insist that we are -- that default doesn`t
matter, and that, you know, it`s not going to affect the economy very much.

And in fact, one colleague of mine from Florida, Ted Yoho, actually
said that default would bring stability to the markets. So that`s the
mentality that we`re dealing with here.

So I`m glad at least that we have an opportunity to restart these
negotiations in the Senate, Republicans and Democrats coming together. And
hopefully, they can send us something as quickly as possible --

HAYES: That doesn`t change --

(CROSSTALK)

HAYES: OK, this is the pressure gamut. The pressure gambit has been
used to pass the fiscal cliff deal, it`s been used to pass Sandy aid, and
now, we`re going to slide again, and what it requires is violating the so-
called Hastert Rule, maybe not just Hastert Rule, just bringing something
to a vote.

But, of course, John Boehner could have done that with a continuing
resolution that passed the Senate that started the whole shutdown.

SCHULTZ: I agree with Chris Murphy. Unfortunately, John Boehner
consistently has shown that he cares more about holding on to his power
than he does about making sure that we don`t jeopardize our economy. We`re
getting perilously close.

I mean, you had Fitch, put us on a watch list now for a downgrade of
our credit rating. I mean, we`re getting perilously close to default. And
that we know is going to have a massive impact on our economy. And it
jeopardizes our future.

It`s going to be very hard if it happens for us to recover from
quickly. It doesn`t have to be this way.

HAYES: The bill that comes out of the senate is essentially -- it
ends the government shutdown, it lifts the debt ceiling. There`s maybe a
few minor things around the edges about Obamacare, but not very much. That
goes to the House.

What happens? Does John Boehner bring that up? And if he does bring
it up, do Democrats vote for that and does it pass?

SCHULTZ: Well, if he brings it up, we`ve got to see what the final
deal looks like, but essentially we`re expecting something that we can vote
for that comes from the Senate that is a bipartisan product.

And John Boehner has to decide whether or not he wants to let the full
House vote and try to pass it with 218 votes of the whole house or whether
he wants to cling to his speakership and insist on it being 217 votes from
his members, driven by Tea Party extremists who think -- who have literally
separated themselves from reality.

HAYES: People should beware of the math here. If John Boehner wants
to pass something with just Republican votes, he`s only got, what, 18 votes
he can lose, and there`s 80 people that signed the letter to defund
Obamacare. So, if Nancy Pelosi says I`m not giving you any Democratic
votes and John Boehner only has to pass it with Republicans, he`s only got
18 votes to work with and anything that comes out of the Senate is going to
alienate at least 40.

Meaning, he basically has to bring it to the floor and get Democrats
to bail him out.

SCHULTZ: Right, he can`t do it without us.

HAYES: Right.

SCHULTZ: But that`s best for the country. The best thing for this
country to get us to continue to move forward and kick our recovery into
even higher gear is for us to pass a bill that reopens the government,
allows to us pay our bills and do that in a bipartisan way.

HAYES: Yes, the recovery would be aided by the body politic of
America, stopping, stabbing itself --

(CROSSTALK)

SCHULTZ: Kind of a crazy concept, isn`t it?

HAYES: Congresswoman Debbie Wasserman Schultz, thank you very much.

SCHULTZ: Thank you.

(BEGIN VIDEO CLIP)

REP. PAUL BROUN (R), GEORGIA: Now, we hear all the time about global
warming, but actually we have had a flat-line temperatures globally for the
last eight years. Scientists all over this world say that the idea of
human-induced global climate change is one of the greatest hoaxes
perpetrated out of the scientific community. It is a hoax. There is no
scientific consensus.

(END VIDEO CLIP)

HAYES: That was Republican Congressman Paul Broun of Georgia, who`s
opinion on global warming makes him a perfect fit to be a member of the
House Committee on Natural Resources, and to be the next person we profiled
be our latest installment of these are the people who are running the
country. That`s ahead.

(COMMERCIAL BREAK)

HAYES: Tonight, right after the show at 9:00 p.m. Eastern, I will be
taking over the ALL IN Twitter account for 30 minutes. So, if you haven`t
already, go ahead and follow us ALL IN WITH CHRIS at Twitter. Once you`ve
done that, you can feel free to just start asking me questions using the
familiar #inners.

I did this on Facebook, and it was actually a lot of fun. Not
actually. I expected to be fun. So, join me at 9:00 p.m. Eastern
@allinwithchris. I promise, it will be awesome.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARRY BLACK, SENATE CHAPLAIN: Lord, deliver us from governing by
crisis, empowering us to be responsible stewards of your bounty, using
judicious compromise for the mutual progress of all.

(END VIDEO CLIP)

HAYES: Amidst the current chaos and political dysfunction, we`re all
holding out hope that someone, somehow will delivery us from catastrophe,
and everything will be OK. We won`t blow through the debt ceiling. We
won`t default. We won`t occasion an unprecedented global financial
catastrophe that will have us all roaming the streets like zombies, or some
Cormac McCarthy novel.

But as we pray or hope from deliverance from other utter disaster,
it`s easy to lose sight of the fact that no matter what happens in the
coming days, a tremendous amount of damage has already been done. Our
government, in its lurch from crisis to crisis to crisis once more, has
inflicted pain on ordinary people, pain that will endure long after this
particular crisis has ended.

Because of the shutdown, the nation is losing $160 million each day
the government is close, just wasting, lighting it on fire. An estimated
800,000 people were put on furlough. No paychecks to make their mortgages
or to pay the bills. National parks and monuments were closed, food safety
and nuclear inspections have been suspended.

And Goldman Sachs chief economist says the shutdown could cost the
U.S. economy 1/5 of its growth next quarter, 1/5 of the growth. And even
if we avoid the worse case, and the debt ceiling, the uncertainty from this
fight comes at a real cost. Remember the last time we did this in 2011, it
led to the first downgrade to the U.S. government credit rating in 70
years. Consumer confidence collapse, hiring stalled and the stock market
plunged and it`s happening again.

Just today, Fitch signaled it may downgrade our credit rating over the
debt ceiling impasse. According to one new study, our propensity for
government by crisis has cost the nation $900,000 jobs. Think about that,
we cannot afford to throw away almost a million jobs. We still have 11.3
million people unemployed. Wages are stagnant and the recovery is still
five years later not working for working people.

And yet our government is making things worse. Congress is making
things worse. And as "Reuters" columnist (INAUDIBLE) put in a great column
yesterday, we are already in default in a very crucial way. Default is
when you break a promise to pay people what you owe them. And America
promise federal employees to pay them for their work and we are not doing
that. We promise to be the reliable cornerstone of the world financial
system and we are failing at that. Indeed, the government promised its
citizens that we could keep the doors open and we`re not even doing that.

The real irony is that economic growth increases the tax base and
reduces the deficit which is what the Republican Party says it wants from
all this, and yet the GOP continues to manufacture crises that hurt growth
in undeniable and measurable ways. It`s enough to make you wonder what
they`re actually trying to accomplish.

Joining me now is Lizzie O`Leary, host and correspondent from
Marketplace Production firm, American Public Media.

So, even if we are bailed out, let`s take the good case scenario.

LIZZIE O`LEARY, MARKETPLACE PRODUCTION, APM: OK.

HAYES: Senate comes up with a deal. It goes over to the House, John
Boehner falls on his sword. This thing was for no reason, for naught.
This could have been done two weeks ago, but that happens. What are the
cascading effects from just what we`ve seen so far.

O`LEARY: Yes, they`re not good. You kind of light it out there and
the headline numbers sound really wonky, but they should scare you. And
they should scare anyone, that you had Barry Black talking about governing
in crisis, this idea of lurching from crisis to crisis.

So, this economic firm, Macroeconomic Advisers, they`re highly
respected, they put it together. You nailed it, 900,000 jobs lost over the
past three years from this kind of crisis to crisis governance.

Think about that. We think about the unemployment rate of 7.3
percent. It would be 6.7 percent if this was on going on --

HAYES: And that`s not a small thing, that`s three months of job
growth of good jobs, of good months of job growth.

O`LEARY: Quite spectacular job growth compared to we have seen, and
yes, 6.7 unemployment is not good, but it`s a whole lot better than where
we have been and where have been for a really long time.

And there`s the same story when you talk about what the GDP of the
U.S. would be.

HAYES: Right. Because we are impacting growth and one of the things
that we have seen in this recovery is growth that is not what we would want
it to be, particularly in a period of recovery, generally, the rule has
been the deeper the trough, right, the sharper the spike up out of it --
kind of the rocket out of it when you hit recovery. And we have not seen
that.

O`LEARY: No, we haven`t seen that. This is -- you know, economists
coming back and forth between a V-shaped recovery, versus a U-shaped
recovery. You know, how long does it take you to climb out.

And so, what they did -- they ran a bunch of scenarios and figured out
that it would entirely average out to taking about 1 percentage point off
of U.S. growth over that three-year period of time. That can sound really
nerdy, but when you think about how our economy is growing, it`s only
growing at about 2.1 percent since 2009.

So, this is a big deal. That`s really big deal. So, going back and
forth --

HAYES: Right. A third of growth.

O`LEARY: Well, it`s actually 12 percent. The percentage the
percentage --

HAYES: Yes, it compounds, right.

O`LEARY: Yes, it compounds and it can sound very confusing, but it
makes a very, very big difference on a macroeconomic level and it makes a
very big difference if you`re trying to get a job.

HAYES: OK. You were saying today you were actually I have been
following your feed, and you were saying today I`m actually starting to get
worried that we`re going to blow through the debt ceiling. Why?

O`LEARY: I`m worried for a couple of reasons. I am worried because I
follow financial markets, I talk to people on Wall Street and there is a
very large disconnect between Wall Street and Washington, and traders that
who I have talked to and folks in the financial services industry kind of
broken it down in a couple of ways.

And they say, we don`t really think they would be so dumb as to get
towards this point. That would be insane. They can`t really let that
happen. They were also saying that about the shutdown.

HAYES: Right.

O`LEARY: Now, reaching the debt ceiling is a much, much bigger deal.

HAYES: Right.

O`LEARY: The other thing that`s going on here, and that concerns me
more is not so much the equity markets. The stock market is what people
watch. It`s the noisy, clangy headline. But it`s the debt market.

So, Fidelity where lots and lots of people have their retirement
accounts, it`s the biggest money market manager. They have been started
getting rid of short-term government debt.

HAYES: They have started selling it. We see yields on things that
are coming due right around.

O`LEARY: Short stuff.

HAYES: There`s all sorts of indicators that we aren`t in panic yet,
but if we nudge over we could.

Lizzie O`Leary from American Public Media -- thanks so much.

We will be right back with #click3.

(COMMERCIAL BREAK)

HAYES: Tonight in our special segment, these are the people who are
running the country. We will introduce you to a congressman from Georgia
who says he did not know if President Obama is a citizen or a Christian.
He did know President Obama is a socialist. And, not just for starters who
do not want to miss what else he miss what else he said. That is coming
up.

But, first I want to show you the three awesomest things on the
internet today. We begin tonight in Boston with a new Mr. October. No,
not slugger David Ortiz whose game-time grand slam against the Detroit
Tigers is already stuffed of Red Sox legend.

The real icon emerging in the wake of outfielder Torii Hunter`s
unbelievable attempt to catch the ball is a celebrating Bullpen Cop. Also
known as the physical manifestation of what all Red Sox fans were feeling.
Once he made it on all the local papers, Boston police officer, Steve
Horgan, became the new leader of Red Sox Nation.

He spawned it on my trend, horganing. Photo shot images of Officer
Horgan are all the rage. Horgan seems to fit virtually any situation
whether be novelty music videos or blockbuster movies and now people are
posing in their own horganing photos, from kids to families to other
Horgans. Here`s "All In" Executive Producer and Red Fox fan, Denis Horgan
horganing in his office.

The second awesomest thing on the internet today, dancing to a
familiar beat. If you are wondering where you have seen "Dancing With The
Stars" contestant Elizabeth Berkley before and you want to pretend like you
have never seen show girls, you might recognize her as Jessie Spano from
"Saved By The Bell" who is responsible for T.V`s most famous caffeine pill
addiction.

(BEGIN VIDEO CLIP)

ELIZABETH BERKLEY, AMERICAN TELEVISION ACTRESS: I`m so excited. I`m
so excited. I`m so scared.

(END VIDEO CLIP)

HAYES: An impressive bout of self mockery, Berkley resurrected the
old jar of pep pills for her latest dance routine.

(BEGIN VIDEO CLIP)

VALENTIN CHMERKOVSKIY, PROFESSIONAL DANCER: What is that?

BERKLEY: They are jive pills.

CHMERKOVSKIY: Jive pills? You don`t need this.

BERKLEY: Yes, I need them, Val. I need them to jive. I`m so
excited. I`m so excited.

(BELL RINGING)

(END VIDEO CLIP)

HAYES: Looks like we are all saved by that bell, but Kudos to Berkley
for being a good sport. However, if her competitor Snooki wants to reenact
the scene in "Jersey Shore," we will take a pass. And, speaking of passes,
here is the third awesomest thing on the internet today, if you have ever
been threatened by a giant fire monster, you can do worst than have Gandalf
from "Lord Of The Rings" help you out.

(BEGIN VIDEO CLIP)

SIR IAN MURRAY MCKELLEN, GANDALF CHARACTER IN "LORD OF THE RINGS"
MOVIE: You cannot pass.

HAYES (voice-over): Unfortunately this only works in fantasy. A real
life Gandalf actually an actor from the group, Improv Everywhere, tried
this hand at amateur wizardry in Central Park to left magical results.

(BEGIN VIDEO CLIP)

ERIC DIES, IMPROV EVERYWHERE MEMBER: You shall not pass -- or don`t
pass. I`m the guardian of the sacred flame. You shall not pass. You are
-- All right, he can pass.

-- You shall not pass. Come on, stop passing. Stop. Not only are
you passing, but you`re doing it exceptionally slowly.

(END VIDEO CLIP)

HAYES: Tough crowd, but real life Gandalf shouldn`t take it too hard.
He didn`t do any worse than real life Indiana Jones, who may still be
trying to outrun at Boulder. You can try to find all the links for
tonight`s Click 3 on our website, allinwithchris.com. We will be right.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

WOLF BLITZER, CNN NEWS HOST: America is going to be destroyed, you
say, by Obama Care? America -- this United States of America is going to
be destroyed if this law is fully implemented? Is that what I hear you
say?

PAUL BROUN, (R) GEORGIA REPRESENTATIVE: It`s going to destroyed our
economy and it`s going to push us into a total economic collapse of America
and that is the exactly what I mean by it. It is going to destroy America.

(END VIDEO CLIP)

HAYES: That is Congressman Paul Broun of Georgia, raising the specter
of Obama Care turning United States into some kind of wasteland. In
tonight`s installment of "These Are The People Who Are Running The
Country," which we take a closer look at the very small group of men and
women in congress, who shutdown the government.

We spotlight a man with a love for tax in Germany, who believes the
Obama Administration is trying to put together a shadow government, to
think the Democratic Party could not find a single person to run against
him in last year`s election. Here is Congressman Paul Brown representing
Georgia`s 10th congressional district.

(BEGIN VIDEO CLIP)

HAYES (voice-over): Congressman Paul Broun won a special election in
2007. He won re-election in 2008, 2010 and again in last November. Now,
he wants to be Georgia`s next senator. His credentials? Well, he is a
doctor. He was a lobbyist for the Safari Club International, a group that
advocates for hunters and he brags about being the first member of congress
to call the president a socialist. Congressman Broun who sits on the house
science, space and technology committee last year, told the Tea Party
audience in a room where the walls had ears his take on the history of the
human race.

REP. BROUN: I have come to understood that all the stuff I was taught
about evolution and embryology, think tank theory -- all of that is lies
straight from the pit of held.

HAYES (voice-over): But, he was not done there.

REP. BROUN: I believe the Earth is only about 9,000 years old. I
believe it was created in six days as we know it. That`s what the bible
says.

HAYES (voice-over): With statements like that from a man who went to
med school, there`s no wonder that when Broun was re-elected last fall,
Charles Darwin received almost 4,000 write in votes. But, when it comes to
Obama Care, Broun was on the house floor in 2010, drawing some interesting
historical analogies.

REP. BROUN: If Obama Care passing, that free insurance card that`s in
people`s pockets is going to be as worthless as the confederate dollar
after the War Between the States, the great war of Yankee aggression.

HAYES (voice-over): A couple of things here. Of course there is no
such thing as a free insurance card. And, as for that last part --

REP. BROUN: As worthless as the confederate dollar after the War
Between The States, the great war of Yankee aggression.

HAYES (voice-over): That is more commonly referred to as the Civil
War, calling it the great war of Yankee Aggression on the floor of the
house is not that different from waving a confederate flag outside the
White House.

Giving his undying devotion to the lost cost, it is not surprising
that when a letter circulated this summer demanding that John Boehner used
a threat of a government shutdown in support a bill to defund Obama Care,
signed on the dotted line. And, that`s how Congressman Paul Brown,
Georgia`s 10th district became "One Of The People Who Is Running The
Country."

(END VIDEO CLIP)

HAYES (on camera): On week three of the government shutdown, are you
feeling frustrated and confused, exasperated and wondering what was this
all for again? Well, we got a peek of the answer today and we will give
you clarity and make you insane. That is next.

(COMMERCIAL BREAK)

HAYES: And, now 15-day government shutdown, the risk of default is
all for what, exactly? The republican ransom note went from defunding
Obama Care to rethinking about it, to a trifecta of ugly, sometimes counter
intuitive and obscured demands.

Today, briefly, the house republican leadership showed their hand.
They floated the idea of a new ransom. There are three components. Number
one, a pay cut for congressional staffs. We mentioned this in the top.
This has been an ongoing obsession of the GOP since the shutdown of the
government.

This is the so-called Vitter amendment, which would disallow the
federal government, which employs congressional staff to contribute
anything to their health care. For staffers, this would essentially be a
pay cut. They would now have to pay out of pocket for insurance their
employer, a.k.a. the government, had previously been providing.

The same way that millions of Americans are receiving employer
provider health care and it is not in any large way affected by Obama Care.
Number two, a give away to the medical device industry. Part of the
affordable care act was to raise revenue for the bill from a variety of
sectors of the health care market, who are going to benefit from 30 million
new people joining the insurance pool.

And, one of them was the medical device industry, which is now going
to have a lot more customers. In exchange for these new customers, the law
imposes a 2.3 percent tax in the medical devices they sell. This raises at
least $30 billion over ten years. You will not be surprised to learn the
medical device industry -- Oh my God, do they hate this.

The lobbying by the medical supplies manufacturing and sales industry
was $55 million from just December of 2011 to 2012 according to the
Sunlight Foundation. The industry has been speaking out of both sides of
its mouth, however, telling Washington the tax is going to kill us, while
telling Wall Street investors the affordable care act is great for us
because of all the new business it brings in.

An honest industry insider told the new republic, "They bring in
millions more people into the health care market. These people are going
to use goods and services. We are going to give you $10 more in businesses
and take $1 in taxes. You mean, you will not hire more people because we
are going to take that $1. It makes no sense. It is nothing but political
pandering."

All right, number three, this might be my favorite, income
verification by the IRS. This was one of the republican proposals floated
this morning. And, it would mean anyone who wants to purchase health
insurance on the exchanges and apply for a subsidy they are qualified for
from the government, would first before they can get the subsidy have to go
through a verification process by the IRS.

Right now the way income is verified is through spot checking in much
the same way the IRS audits. Some people get out of it, some people don`t.
But, the threat of an audit hopefully keeps you honest.

Instead of that, every single person to go through this onerous
process of income verification through the IRS empowering an entity that
conservatives have just spent the last nine months, basically, calling an
arm of theory.

(BEGIN VIDEO CLIP)

JENNY BETH MARTIN, CO-FOUNDER OF TEA PARTY PATRIOTS: The constitution
is designed to constrain the government.

MIKE NEEDHAM, HERITAGE ACTION: The tea party is alive and well and we
are going to write the obituary for big government.

MICHELE BACHMANN, (R) MINNESOTA REPRESENTATIVE: And, now with the
implementation of Obama Care in hand and knowing that it is the IRS, the
internal revenue service that will be the enforcing mechanism for this new
entitlement program of Obama Care.

UNIDENTIFIED MALE SPEAKER: First of all, the best thing to do with
the IRS is to abolish it and send all of our IRS agents into the board
room.

SEN. TED CRUZ, (R) TEXAS REPRESENTATIVE: It is a manifestation of
too much power in the federal government, when the federal government has
that much power in our individual lives. It is an invitation to being
abused.

REP. BACHMANN: They have to enforce Obama Care for all Americans. No
one will escape this bony death-like grip of the IRS.

RAND HOWARD PAUL, (R) KENTUCKY REPRESENTATIVE: Anybody want to fire
some IRS agents?

CROWS: Yes!

REP. PAUL: Why don`t we start with the 16,000 IRS agents that are
going to implement Obama Care?

CROWS: Yes.

SEN. CRUZ: And, I think we ought to abolish the IRS and instead move
to a simple flat tax.

(END VIDEO CLIP)

HAYES: That`s the political party this morning was floating the idea
of increasing the reach in intrusiveness in the IRS into people`s income.
Now, though, we have learned the ransom note was paired back even further.
On move forward, republicans are telling us as latest, few hours ago, all
of this pain and misery and cost and drama of the whole thing just so we
can get a health pay cut for our staffs.

Joining me now is former Senator Blanche Lincoln, Democrat from
Arkansas who is now working with the National Federation of Independent
Business. He is a principal of Lincoln Policy Group referring that
lobbyists on behalf of Walmart Experian among other companies. Tim Carney,
Senior Political Columnist for Washington Examiner, visiting fellow at the
American Enterprise Institute, a Conservative Think Tank, and Ezra Klein,
MSNBC Policy Analyst and Editor of the "Washington Wonkblog" and the just
launched nomore.washingtonpost.com.

Tim Carney, I will begin with you with a little bit of rare praise for
the Tea Party caucus in the house of representatives, who I have been
beating up on throughout the shutdown, which I find execrable undertaking
where now in. However, John Boehner wanted this medical device tax repeal
and the house conservative caucus balked at it.

And, I think they balked at it in part because you have been railing
against it in your columns as essentially a give away to K Street. I want
to hear from you, what the dynamics were from that. I want to hear from
you former Senator Lincoln, what you thought of how that went down right
after we take this break.

(COMMERCIAL BREAK)

HAYES: We are back, still with me former Senator Blanche Lincoln, Tim
Carney, Ezra Klein. Tim Carney, you and the Tea Party killed the medical
device tax repeal, explain?

TIME CARNEY, WASHINGTON EXAMINER SENIOR POLITICAL COLUMNIST: Yes. I
thought you pointed out great earlier that the medical device industry just
like the drug industry and the hospital industry were lobbying for and
benefiting from Obama Care while Obama was falsely claiming to be battling
the special interests.

And, now, the medical device industry has tried to play the standard
in Washington play, to get the democrats to subsidize you and then you get
the republicans to kill your tax hikes. At this time, the conservatives
said no. You know what? The tax is bad, but we are sick of just doing
what K Street tells us. And, so the conservatives - the conservatives --

HAYES: Yes.

CARNEY: -- within the republican caucus killed that.

HAYES: This morning I will note that it wasn`t exactly so clear cut
the medical industry is medical device industry as far were lobbying for
the affordable care act. They were also simultaneously lobbying for and
lobbying against the act at the same time. It was a hedge all around.
Blanche, what was your take on this whole thing in terms of the way the
medical device tax issue has kind of -- was floated in as a solution and
then snatched away, did that surprise you?

BLANCHE LINCOLN, AMERICAN LOBBYIST: No. Nothing surprises us right
now. I mean there is no adults in the room. But, first of all, it is
great to be with you three gentlemen. But, where the device tax comes in,
I mean there was a compromise to be had there even the White House. I mean
-- you know, but compromise is a bad word. People here, particularly
people that hate government do not want to come out with a solution. You
know? They are hating government.

HAYES: But, the thing I think I found so striking about this is that
we were having this grand ideological fight that looks like it is going to
end in an essential compromise that will basically going to have nothing to
do with anything that American people actually care about, which is the
medical device tax, whether it is good or bad policy. No one in this
country is in the streets about the medical device tax except people in the
medical device industry.

LINCOLN: You are right there and shutting down the government and
defaulting on our debt -- you know, basically, throwing our credit rating
down the tubes does nothing for creating jobs or growing the economy, which
is where we need to be focused. And, these people need to be focused on
that. We still have somewhat of a fragile economy and we have to get about
the business of putting it back on track and this does nothing.

HAYES: Ezra? Ezra were you surprised by the ignominious end of the
medical device tax repeal?

EZRA KLEIN, MSNBC POLICY ANALYST: Not, usually. As you said, I think
that Tim and folks and people are doing a good job of mobilizing against
it. But, more of the point, people are not getting anything. This began
in supporting for a member as a sort of anti-Obama attack. And, the
medical device tax, something that is important to know about it is it is
one of these policies. It is in fact in the Obama Care law, but has
nothing at all to do with it.

And, the fundamental problem here -- and, the reason this has always
been so hard to solve is that at this point you are seeing a war that is
not really over policy anymore. It is over this kind of negotiating
principle of whether or not you can extort to concessions in order to keep
the government in order go to the debt ceiling.

So, I mean the other problem that you are beginning to face the late
if the day and it is part of the reason this thing wasn`t going to go
anywhere anyway is that, senate democrats were not going to help. House
democrats were going to oppose and so Boehner couldn`t go to them for
votes.

So, in some ways, I think the debt of the medical device tax here was
over determined, but the one thing I will say when they do eventually get
through this and go to a budget conference. I will be surprised if the
medical device tax survives a year. It looks to me like so many actors in
the political system --

HAYES: Who want to kill it?

KLEIN: -- and is probably gone. It was more killed because people
didn`t want to give up the principal of not negotiating here.

LINCOLN: That`s right.

HAYES: Tim?

CARNEY: And, that point, Ezra applies on both sides, right?
Republicans want to make sure that they leave with something, so it is not
a shutdown about nothing. But, Obama out there, he is trying to break the
Tea Party. He is trying to break Boehner. The Veto thread issue today is
more about trying to smash the Republican Party than about sort of
substantive objections to what was in these deals.

KLEIN: Yes. But, I think there is one thing that they were saying
there. It is not trying to smash the Republican Party, right? Obama would
like to do a compromise that would make them more popular in a lot of ways.
It is trying to smash a particular tactic of the Republican Party.

They had begun pioneering -- or not pioneering exactly, but really
using aggressively in recent years, which were these hostage showdowns to
get policy concessions. They are not trying to break the Republican Party.
If they were just not been doing this, they would be in much better shape
and nobody would be accusing them of trying to break them. Some ways Ted
Cruz is trying to break the Republican Party.

HAYES: Yes. Blanche, can you put this in the historical perspective
in the ways in which you -- when you were serving -- There is this debate I
think and then Tim I want to get your response to this about the
unprecedented nature of this and it does all feel quite unprecedented to
be, although, we have had shutdowns before. Do you see this as
unprecedented?

LINCOLN: Well, it is certainly a culmination of where we have been
going. I came to Washington in 1982 as a staffer. In 1992 as an elected
official and I could see the changes then. But, Ezra`s absolutely right,
it has become winning the battle and losing the war. All they care about
is the immediate battle and if it doesn`t bring them the kind of
glorification that they want then it just goes overboard and they move on
to the next thing --

HAYES: So --

LINCOLN: -- but, yes, I went through the 1995 shutdown, but people
realize particularly the republicans what kind of damage it was doing to
them as well as to the process and that it was backfiring because Clinton
was actually getting much more of the win aspect of things than they were.

HAYES: Tim, if it comes down tomorrow, it`s looking like the senate
is going to craft something and pass it that is going to be a largely clean
continuing resolution. If it comes over and passes the house -- I mean
what the heck do conservatives go and tell their people about -- what do
they tell the American people? Forget their base, they got nothing. What
do they just tell the American people what the hell this whole thing was
for?

CARNEY: Well, I think the idea is that right now the house
republicans are hoping they can get a debt limit hike but not a CR, so they
can get the shutdown going. If they fail -- if the shutdown ends, then
they do have to go home and say, we tried what we could, but you know, we
couldn`t beat Boehner and we couldn`t beat Reid and Obama. And, so the
real question is -- are there going to be primaries, is there going to be a
coup of Boehner? I don`t see that. I mean I hope that doesn`t happen as
they are trying to kick Boehner.

HAYES: The big question is -- the big question is, is the
constituency that John Boehner has been trying to please with this 15-day
shutdown essentially satiated that he fought as much as he wanted?

Former Senator Blanche Lincoln, Tim Carney from the Washington
Examiner, MSNBC Policy Analyst, Ezra Klein, thank you all. That is "All
In" for this evening. The "Rachel Maddow" show starts right now. Steve
Kornacki in for Rachel. Good evening, Steve.

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

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