updated 12/2/2013 10:47:56 AM ET 2013-12-02T15:47:56

THE RACHEL MADDOW SHOW
November 27, 2013
Guest: Norm Ornstein, Julia Ioffe


STEVE KORNACKI, MSNBC GUEST HOST: Good evening. Thanks to you at
home for joining us this hour. I`m Steve Kornacki. Rachel has the night
off.

You know, it is the day before Thanksgiving in America, because of
this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The Office of the
Presidency, the most powerful position in the world, brings with it many
awesome and solemn responsibilities. This is not one of them.

(LAUGHTER)

(END VIDEO CLIP)

KORNACKI: That is the president today pardoning a turkey with first
daughter, Sasha and Malia. The turkey`s name, in case you are wondering,
is Popcorn. He is from the state of Minnesota.

The president was obviously back at the White House today along with
Popcorn. He spent the better part of this week not in Washington. He
spent the better part of this week in California where he attended fund-
raisers. He visited DreamWorks animation where he joked that his ears were
the inspiration for Shrek.

And in California, the president gave a big immigration address where
he was heckled by a DREAMer who pleaded for an end of deportations. The
president said there was only so much he could do himself. He is going to
need Congress to act to do more.

One thing he did not devote a lot of time of talking about in
California, though, is the rollout of his health care. California, which
is America`s biggest state obviously, is crucial to the success of
Obamacare.

President Obama really doesn`t have to sell California on the
Affordable Care Act. California is already pretty much sold on the health
care law. The state-run exchange, calling it Covered California, is up and
running and running well.

Paul Krugman wrote about the implementation and said that enrollment
is surging. At this point, more than 10,000 applications are being
completed per day, putting the state well on track to meet its overall
targets for 2014 coverage.

As Krugman also pointed out, it matters who is signing up under the
law. Young, healthy people are badly needed to help keep costs down. In
California, last month alone, one quarter of all enrollees were those
healthy young people. They`re between the ages of 18 and 34.

You can track this yourself if you want. Covered California actually
releases the numbers publicly each week online.

Health care law is a success so far in California, and there are many
potential reasons for that success. Maybe there has been better
advertising there. Maybe Californians themselves are just more into health
care. Maybe the home to Silicon Valley couldn`t stand the national
embarrassment of creating a Web site that doesn`t work.

But one definite reason why the health care law is working in
California right now is because of that state`s governor. It`s a
Democratic named Jerry Brown.

I want to take a minute and talk about him and about what he is doing
right now, because I don`t think there is a single politician in America
who fascinates me more than Jerry Brown.

Right now, he is the oldest governor in the country. He`s also the
oldest governor in California`s history.

But if you go back four decades ago, he was the youngest, elected in
1974 at the age of 36. It took him just over a year to decide, it was time
to run for president. So, he entered the 1976 Democratic race and he
entered it very late, in May of that year, months after the New Hampshire
primary. Something like that would be unthinkable today.

But nominations back then at least theoretically could be decided at
dead-locked conventions. So, Brown was the young governor of the nation`s
biggest state, jumps into the race for the Democratic nomination in May of
`76.

And guess what? He starts winning. He wins in Maryland. He wins in
Nevada. He wins big in California.

It`s too late for him to make the battle in Rhode Island, in New
Jersey. So, he tells voters to check off uncommitted on their ballots.
Uncommitted wins those states.

Jerry Brown was pretty much a national political sensation in 1976.
They use all that late momentum from all of those late victories to steal
the Democratic nomination from Jimmy Carter at the convention. Those are
long shot, but he actually came close to pulling it off.

Trying again in 1980, but with Carter facing a challenge with Ted
Kennedy, there wasn`t room for anyone else. After that, Jerry Brown`s
political career just kind of crumbled.

He lost popularity in California. He lost the Senate race in 1982.
And then he kind of disappeared.

He spent the `80s in Mexico and in India, and in Japan. He worked
with Mother Teresa. He studied Zen Buddhism. He came back years later a
changed man, a man forgotten by the political world, an outsider, something
of a radical even.

So, he ran for president again this time in 1982. This Jerry Brown
had no patience at all for the political system, no patience for
politicians like Bill Clinton. The whole system was corrupt, Jerry Brown.
That was his message. He had no problem saying it, no problem saying it to
people like Bill Clinton to their face.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT: You ought to be a shamed of yourself
for jumping on my wife. You are not worth being on the same platform as my
wife.

JERRY BROWN (D), CALIFORNIA GOVERNOR: I tell you something, Mr.
Clinton, don`t try to escape it. Ralph Nader called me this afternoon and
he read me the article from "The Washington Post."

CLINTON: Does that make it true?

BROWN: I was shocked by it. I was shocked by it because I don`t
think someone in government should be funding money to his wife`s law firm.

(END VIDEO CLIP)

KORNACKI: It`s just a small taste of what that campaign was like.
When that `92 campaign was over, Jerry Brown really was a political pariah.

The media thought he was an unhinged madman. Bill Clinton, now
President Bill Clinton, he wasn`t about to throw him any life lines. Jerry
Brown was all alone. He was done. He was finished.

All of the potential from the spring of 1976, this is where he was
going to end up.

Now, flash forward to 2010, two decades later. He found a way to
crawl back to at least a little bit of relevance in the 1990s. He turned
60 and he started all over again, at the bottom of the ladder, became the
mayor of Oakland, California. He did that job for eight years and then got
himself elected attorney general in 2006.

Then, the governor`s office opened up in 2010 and he ran for that and
he won the Democratic nomination.

He found himself in a dogfight in the general election. He needed
some help. He needed a late boost. So, with his comeback on the line,
Jerry Brown seemed turned to that same guy he had relentlessly savaged back
in 1992.

(BEGIN VIDEO CLIP)

BROWN: President Clinton -- now, he was great in office, he`s great
after office. He didn`t retire to Palm Springs to play golf. He is out
there doing stuff. He`s helping people in Haiti, he`s fighting AIDS, he`s
dealing with the victims of tsunamis.

He is a guy who is mobilizing the highest spirit, the angels of our
better spirits. He is doing it. And that`s the spirit I would like to
bring to California.

(END VIDEO CLIP)

KORNACKI: I have to tell you, that is what I love about politics,
scenes like that, with all that rich, complicated history, just beneath the
surface.

Anyway, Brown won that governor`s race and he was back at the age of
72. He was back in the governor`s office of the country`s biggest state
all over again.

And since that time, it has gone pretty well for Jerry Brown. His
popularity is high. His re-election prospects are bright.

For the first time in California history, Democrats have a super
majority in the state legislature. Jerry Brown has a mandate in California
and he is using it. One of the things he is using it to do is to make sure
the health care law works in his state, to show the most populous state, a
state of 38 million people, can actually make the Affordable Care Act work.

Implementing Obamacare is one of the reasons Jerry Brown is seen as a
successful governor right now, why he is suddenly attracting national
attention again, just like he did all those decades ago.

Implementing Obamacare successfully is one of the reasons that there
are actually people and I can`t quite believe I get to say this, but it`s
true. There are actually some people in politics who are touting him as a
perspective presidential candidate for 2016. That is what being a
successful governor, what making Obamacare work has done for a man who had
fallen to the bottom of American politics.

In the Washington that President Obama returned to yesterday, the news
for Democrats seems grim. Look at these headlines, "Democrats lose 2014
edge following Obamacare uproar." "Is a Republican way of building?"
Quote, "The national political climate is starting to resemble 2010 when
Republicans won control of the House of Representatives by riding a wave of
voter anger." It`s just from today.

If the midterm election were today, according to the Beltway press,
Democrats would get trounced.

But the election, of course, is not today. The election is a year
from now.

And so, what happens if the health care law ends up working
nationwide, just way it`s working in California. What happens if three or
four or five months from now, health care coverage in the nation looks like
health care coverage in the most populous state in the nation?

The health care law has been a success and helped create another
chapter in presidential buzz all over again in the career of one very
unique politician.

Joining us now is Norm Ornstein. He`s a resident scholar at the
American Enterprise Institute. And he`s also the author of "It`s Even
Worse than It Looks: How The American Constitutional System Collided with a
New Politics of Extremism."

Norm, I really appreciate you taking the time tonight. And I thank
you also in advance for indulging me in my Jerry Brown fascination. I just
-- the idea that somebody who could run for president in 1976 could be
theoretically touted 40 years later I thought endlessly amusing.

But I also wonder if there is a lesson there? If this is sort of a
refreshing message in this season of bad news all around in politics, that
sometimes good policy does make for good politics? That he can implement a
law like this so far successfully in California and get a real political
reward for it.

NORMAN ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Steve, first, let me
say. I`m not indulging you. Every time I am on w you, you provide history
and context, which is so rare in modern television. That`s why we all love
you.

KORNACKI: Now, you are flattering me. But I`ll take that too.

ORNSTEIN: But you know, if you look at what`s happening in
California. Jerry Brown is a significant part of that. His wife, too, by
the way, who is a former business executive with The Gap and they really
govern together.

But they, along with the state legislature that wants to see this work
in an extremely complicated state, shows what the prospects are. We see
the same thing with Steve Beshear in Kentucky, in a state that is hostile
to the law but it`s working extraordinarily well.

Then, we look on Thanksgiving Eve at the states where governors just
because they don`t want Obama to have a victory are denying their citizens
the ability to get health care in Georgia, where we`ve got five navigators,
they have tried to block people from being able to get the information, all
the states where they are denying Medicaid. I think what we can see is we
are going to have models out there by 2014 hitting a lot of states that
show the great potential for expanding insurance and lowering the cost for
large numbers of people and opening things up.

But let`s face it, we are also going to have states including those
where they are actively undermining it where it isn`t going to be working
so well.

KORNACKI: On that point, then, because today was sort of a day where
you have this confluence in Washington about the political damage at least
potentially for Democrats from the rollout problems they have had so far.
In the headline from this like CNN poll that came out, in the generic
ballot next year, Republicans have recovered from the shutdown a month ago
and are suddenly in a lot better shape.

But if you dig a little bit deeper and you ask the question, do you
think that the problems right now with Obamacare will be fixed or is it
just -- you know, will it not be fixed? Is it a failure? Overall, people
are saying 54 to 45. They think it will be solved.

If you look among Republicans, it is overwhelming. Three-quarters say
it won`t be solved. It seems to me, the entire Republican calculation for
the election year in 2014 depends on nothing changing from this moment
today, this being the reality of Obamacare for the next 365 days.

ORNSTEIN: Absolutely.

You know, Greg Sargent of "The Post" has been particularly good at
pointing out the closed information loop for Republicans. They are all
convinced that the law is already in tatters and can`t possibly work. It`s
somehow just going to fall apart on its own.

Deep within that poll is also another reality. The younger voters,
the younger people in the electorate are very much convinced that the law
will end up working and what we see in California, which is particularly
important, is that these younger people, the so-called invincibles are
signing up in reasonable numbers.

What matters is not so much the number of people in the end that sign
up for the Affordable Care Act, it is the proportions. And if we do get in
the end a lot of younger voters and insurance companies are going to make a
strong effort to get them, because it is in their interest. And they will
focus on convincing their parents as much as these younger people, then
we`ll be in a different place a year from now.

And, of course, all of these news stories that look at where the
electorate is today, if we look at it seven weeks ago, it would be a
disaster for Republicans. The idea that extrapolating from today the next
year means anything, it just fills up some news space.

KORNACKI: All right. Well, speaking of filling up new space, the
next time we have you on, we will discuss Jerry Brown`s potential running
mates for 2016. I think that`s the next thing.

Anyway, Norm Ornstein --

ORNSTEIN: Linda Ronstadt has to be on the ticket.

KORNACKI: They were together once before.

Norm Ornstein, resident scholar of the American Enterprise Institute,
author of "It`s Even Worse Than It Looks," thank you for joining us on
Thanksgiving --

ORNSTEIN: Happy Thanksgibakah (ph).

KORNACKI: Thank you.

This is a piece of the Dead Sea Scrolls and this is a letter on
presidential stationary which was so hard to read, but it came with its own
translation. The story of my surprising presidential pen pal. I will tell
it to you, coming up.

(COMMERCIAL BREAK)

KORNACKI: So, I want to tell you about the time that me and Bill
Clinton became pen pals. I mean, we sort of became pen pals, I`ll explain.
There`s a reason for this.

But I think if I`m going to explain, you probably need to first
understand something about where I`m from.

This was the paper that me and my family got every day when I was kid,
"The Lowell Sun". Lowell, Massachusetts. It`s a tough, old mill city on
the Merrimack River in Massachusetts. If you remember the movie "The
Fighter" from a few years ago with Mark Wahlberg playing the boxer Micky
Ward, Christian Bale as his troubled brother, that movie was set in Lowell
and they pretty much got it right.

Now, I admit, I didn`t I grew up in Lowell myself. I`m not actually
that tough. I`m from one of the towns outside of it, one of the less tough
towns outside of it.

But still, when I was growing up, Lowell was the closest city to us.
We were connected to it in a lot of ways. It was a city that had seen
better days. When it got attention from anybody outside our area, it was
usually for the wrong reasons. Mostly, though, the part of Massachusetts
where I`m from didn`t get any attention.

When I was 12 years old, it suddenly got a lot, and it got a lot of
very positive reasons, a very exciting reason, it`s because of this guy --
Paul Tsongas. He was born in Lowell, he come back to Lowell after college
and after the Peace Corps. He`d gone into local politics.

And now, in 1992, he was running for president. This is just when I
was starting to get interested in politics. I didn`t know much about the
difference between the two parties. But I did know that it was really cool
that someone that lived a few miles from our house was running for the
White House, the most important job in the world, a guy from Lowell.

I became kind of obsessed with his campaign. Every afternoon, "The
Lowell Sun" would land on our doorstep. I would devour the latest updates
from the trail. I wanted him to win. And for a brief moment there, it
actually looked like he might. He won New Hampshire. He won Maryland, he
had momentum, and then, well, and then Bill Clinton overwhelmed him. And
that was pretty much that.

There were a lot of reasons that he beat Tsongas that year, reasons I
didn`t fully appreciate or fully understand when I was 12 years old. But
one thing I did know was that he`d gotten rough.

Clinton had pushed the line in some of his attacks. He crossed the
line. I was mad at Bill Clinton then. I`ll admit, I held a bit of a
little bit of grudge.

So, now, fast forward to 2007. I am writing a column for "The New
York Observer". I`m a freelance columnist. I`m getting paid almost
nothing. I`m not doing TV. I`m in thousands of dollars of debt. That
might even be understating it. I`m a nobody.

But with Hillary Clinton setting out to run for president, I find
myself thinking back to that 1992 campaign, to how the Clintons had beaten
Tsongas.

Then, I decide to write a column about it, with a warning I guess I
was supposed to be to Hillary`s Democratic opponents of what they might be
in for. And like all of my columns back then, it ran and nothing happened.

One woman from the Upper West Side wrote to me, but she always wrote
to me usually to tell me how much she didn`t like me. Besides that, I
didn`t hear from anybody. Then, a month or so later, this comes in the
mail.

It`s from Harlem, Bill Clinton`s office. Look at the upper right. I
guess when you are an ex-president, your signature counts as a stamp.

So, I opened it. I figured it`s some kind of a form letter. I must
have been added to a mailing list. Maybe it`s an offer to meet him for a
round of golf, which I don`t play, for a donation of $50,000, which I don`t
have. I don`t know, something like that.

But it turns out t was actually this, I have it right here. It was a
personal letter, handwritten, almost four pages long and almost completely
indecipherable. His penmanship was a little sloppy. It looks like he used
a marker or something. Fortunately, though, it also came with this, a
typed translation.

"Dear Mr. Kornacki," Clinton writes, "I rarely answer articles like
yours, but it was so selective in its use of the facts, I can`t resist
pointing out a few things you overlooked."

I read the whole thing feeling a weird mix of emotions. I was
flattered to get it. Some of what he was saying in it made sense to me.
Some of it kind of irritated me.

Mostly, I was confused. Did the former president of the United States
really take time to write to me, a complete nobody, to write a four-page
handwritten letter litigating details of the 1992 presidential campaign?

I had really gotten under his skin, I realized. As I started to think
about it, I kind of got it. I mean, the Clinton/Tsongas race had become
really personal.

Tsongas died in 1997. And one of his friends told me that when he
did, he had really never forgiven Clinton for how that `92 campaign went
down.

I was saying about Clinton in that column things he probably never
stopped hearing from Tsongas` friends, from people who devoted themselves
to Paul Tsongas. I couldn`t deny a lot of the media in 1992 had painted
Tsongas as the good guy and Clinton as the villain. I had no problem with
it at the time because I believed it.

But now, I can see a little bit for more of the complexity. "I wish
the conflict hadn`t become so personal", Clinton wrote to me. "As your
article demonstrates, the premise of your campaign was, in part, its purity
and the fact that anyone who disagreed with you was a pander bear."

I also realized at that moment that Bill Clinton apparently thought I
was around 40 years old and had worked for the Tsongas campaign.

Anyway, I decided to write him back, to tell him the story I told you.
Like I said, though, I basically had no money, I had no printer, no fancy
stationary or anything like that. My letter to Clinton had to look
professional. So, I went to Kinko`s and I paid to print it on fancy paper.
And I tried to cut the paper into the same small size that Clinton`s note
to me was written.

Of course, I ended up botching it and the paper was all uneven and
slanted and diagonal and everything but I didn`t have money to buy new
fancy paper. So, I sent the letter anyway.

And a few weeks later, I got another note back from Clinton. This one
was much shorter. There was no translation. "Dear Steve," it said,
"thanks for your letter. I read it carefully and I was very moved by how
deeply Paul Tsongas touched your life. He was lucky to have a supporter
like you and have his commitment to public service live on in you. I hope
we get to meet someday. Sincerely, Bill Clinton."

Well, I`m not sure how much he meant the last part. I have requested
a few interviews with him in the years since then. The answer keeps coming
back no. But I`m trying not to take that personally.

Anyway, the reason I am sharing this with you, because of this. It`s
the latest outrage prop for the right. It was supposed a handwritten note
from Barack Obama to a Texas man named Thomas Ritter, who wrote to him to
argue against the health care law and to say that, quote, "any citizen that
disagrees with your administration is targeted and ridiculed."

Obama`s response is respectful. He tells Ritter that he welcomes
dissent, he understands the health care law isn`t that popular, but he
still believes it`s the right thing to do.

Now, the right is all upset about this because Obama uses the word
teabagger in the note. But he is using it to address Ritter`s claim in his
own letter that, quote, "you make fun of teabaggers."

Anyway, we don`t have official word this is an authentic word from the
president, but Ritter is now trying to sell it for $24,000 online. "The
letter is just words on a paper", Ritter told "The New York Post". ":It
doesn`t mean anything to me because Obama doesn`t mean any of it."

And I got to disagree with Ritter right there, because to me, it is a
very healthy sign, when a former president like Bill Clinton or a sitting
president like Barack Obama sends a note like this, it is prove they aren`t
quite as insulated as we all fear they are sometimes.

Criticism does get through to them. They hear it. They feel it.
They carry it around with them. Sometimes, they just can`t help letting
someone know.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: If President Obama forces a partial
government shutdown and if Republicans stand together and say, we will not
fund government that funds Obamacare, you`ll have an impasse. If you have
an impasse, one side or the other has to blink. How do we win this fight?
Don`t blink.

(APPLAUSE)

(END VIDEO CLIP)

KORNACKI: Well, we all know that Republicans did give up and blink on
that idea. That was back in October. The shutdown was probably their
lowest moment to date in the Obama presidency.

But that don`t blink strategy didn`t just come from Ted Cruz. It came
from the folks that made that huge defund Obamacare sign behind him there.
A group that was not that long ago widely respected even by Democrats, a
serious ideas factory. They are now deeply divided and at war with itself.
That war is getting a very public airing.

We will tell you all about it right after this.

(COMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), FORMER PRESIDETIAL CANDIDATE: It is a politicians
dream, you`ve got to admit, standing at the top of this pedestal here and
now, I`ve got a little step underneath to get even higher. So, obviously,
I want to express appreciation for Cecil B. DeMille (ph) for organizing
this event this morning.

(END VIDEO CLIP)

KORNACKI: That`s how you want to kick off the Thanksgiving holiday,
some vintage Romney there for you, April 2006, basking in the glow of a big
political achievement for the then-Massachusetts governor. It was the
signing of his landmark health care reform bill.

2006 was Romney`s last year as governor of Massachusetts, and he
wasn`t running for re-election. So, pretty much everything he was doing
was positioning him for a presidential run in 2008. That signing was going
to be the photo-op that captured his good side, his best side, his
presidential side and his team made sure that the signing was a showcase.
They had Senator Ted Kennedy, the big champion of health care reform up on
the stage, representatives from the Massachusetts legislature, health care
industry people and some D.C. think tank folks.

You see that guy on the left there, that is Robert Moffit, PhD. He
was the director for the Center for Healthcare Policy Studies at the top
conservative think tank in the country, the Heritage Foundation.

Governor Romney`s people had insisted that the spot on the stage with
the governor would be reserved for that guy from the Heritage Foundation.
Romney even made a point to give Heritage a shout-out in his speech,
thanking them for being the architects of one of the, quote, "centerpieces
of the insurance reform."

Romney made sure that Heritage was represented on stage that day, to
get their conservative stamp of approval in the Heritage Foundation warrant
to be there because it was their idea he was signing into law.

In 1989, the Heritage Foundation had put out this policy paper. It
was called "Assuring Affordable Healthcare for All Americans." And the
paperback in 1989 proposed a new idea for health reform, the individual
mandate, a requirement that all household purchase private insurance. With
that, the Heritage Foundation staked out the conservative poll on the issue
of health care.

And then in 2006, the basic Heritage health care framework was
established as law in a major state by a Republican governor that was going
to go out and run for president.

Of course, Romney didn`t win in 2008. Barack Obama did. One of his
first orders of business was health reform.

His model was, I think you know this right now, the plan that was
working in Massachusetts, the Romney plan, the Heritage Foundation plan.

But in the political climate of the Obama era, those subtleties may
have been lost on the right. They were lost on the right. They`ve wanted
an all-out war on the Democratic president and any policy ideas he
advances, which means for a conservative movement that had helped lay the
foundation for the Affordable Care Act has been nearly four years of all-
out war on Obamacare.

When Congress was debating health care in 2009, Republican Senator Jim
DeMint predicted it would be Obama`s Waterloo. We are going to break him
on this, he said. The right hasn`t stopped trying to do that ever since.

It`s a quest that DeMint has continued at the Heritage Foundation,
which he`s been running since he quit his Senate job last year. The
Heritage Foundation that DeMint took over was and is very different than
the one that produced that health care policy paper all those years ago.
It is one where the think tank wing has taken a back seat to the political
action wing, something called Heritage Action.

It`s Heritage Action with its legislative score cards serving as
measurements of conservative purity that set a radical goal this year --
the end of Obamacare through the shutting down of the federal government in
the threat of a debt-ceiling default. It was the threat of landing on the
wrong side of Heritage and of getting a bad number on the scorecard that
kept all those Republicans in line for so long this fall, as the government
closed down, as their poll numbers dropped, as they asked themselves, wait,
why are we doing this all again?

Twenty-four years before shutdown, it was the Heritage Foundation that
conceived of a conservative, market-friendly alternative to the Canadian
style health care, a concept that is now etched into law under the name
Obamacare.

In that way, the revolt the Heritage Foundation led was a revolt
against itself. A generation after that 1989 health care paper, a group
that had been the preeminent source of conservative policy ideas has become
less of a shot in the arm for the right than more a shot in the foot.

This week, "The New Republic" is out with a piece that gives insight
into the organizations decline, quoting one Republican staffer, bitterly
noting that, quote, "If Nancy Pelosi could write an anonymous check to
Heritage Action," she would.

Joining us now is the author of that story about the Heritage
Foundation, she is Julia Ioffe. She`s a senior editor at "The New
Republic."

And, Julia, we appreciate you being here tonight.

So, the story of Heritage is interesting obviously because in my mind,
they went from coming up with the idea for the Affordable Care Act
essentially, to shutting down the government over its enactment and
implementation. When a lot of people think of that story, they think of
Jim DeMint, the South Carolina senator who now runs Heritage.

But your story says it`s actually -- it`s this duo, it`s two guys who
are a lot younger than Jim DeMint that have taken it and turned it away
from being a think tank into just a pure sort of partisan warfare machine.

Tell us who they are and how they`ve done this.

JULIAN IOFFE, THE NEW REPUBLIC: Sure. So, the -- my piece actually
focuses on one guy, Michael Needham. He`s 31. He`s the CEO of Heritage
Action. I think that title CEO is significant. He has a lieutenant, Tim
Chapman, who is the COO.

They were helped to be put in place by the chairman of the Heritage
Foundation Board, a guy named Saunders, who was a Wall Street banker in the
`80s. He pushed -- when he was elected to the board in 2009, he pushed for
a more aggressive approach, for Heritage to take a more aggressive approach
on the Hill and to create a lobbying arm.

By this point, Michael Needham had served as chief of staff to
Heritage Foundation`s creator and president, Edwin Feulner. He had gone
off to work with the Giuliani campaign. He went like his father to
Stanford Business School.

He has a very sterling pedigree. He`s from the Upper East Side. He
went to Collegiate and Williams (ph). He was also a proponent of this.

He was brought back to run this lobbying arm in 2010 whether it was
created. And because a lot of the organizational details were left vague,
how the money was spent, where it would come from, who would call the
shots, he and Tim Chapman basically called the shots because there was
nobody else calling it for them.

And then by the time the Heritage elders woke up, they had radically
changed the Heritage brand. They had alienated a lot of people on the Hill
for their aggressive, sharp elbow tactics. And the elders at Heritage
Foundation kind of woke up one day and realized that the organization has
radically changed.

KORNACKI: So, right, that`s what your piece brings out, the tension
between the elders, as you call them, and this sort of new guard. What`s
interesting to me is, I think this sort of illustrates a challenge that
more broadly faces the right now, because when you look at Heritage, you
can say politically, obviously, the shutdown was a disaster for the
conservative movement and the Republican Party. And traditionally, the
role of heritage is this sort of role of policy ideas for the conservative
movement. That might be changing.

But at the same time, leading this charge to defund Obamacare has
meant a windfall in terms of grassroots donations for Heritage and other
groups like it.

How do people sort of reconcile those two things that with the
grassroots, they can turn and make an appeal and bring in big money even if
they are not doing what they used to do?

IOFFE: Well, I think the jury is still out on that. If you talk to
people at Heritage or people who were pretty senior there who have recently
left, they would tell you the same thing. Heritage Action -- Heritage
Foundation, excuse me, is a very old, well-respected brand on the right, an
$82 million annual budget. So, they burn through $82 million every year
and have plenty left for the next year and the year after that.

Heritage Action raised $5 million last year. Their biggest donation
was from the Koch brothers for $500,000. Everything else comes from
smaller grassroots donations. And we have yet to see what they did with
the shutdown and bringing the U.S. to the brink of default with nothing to
show for it, how that will affect the bigger donors. A lot of people on
the right and business groups are angry at them.

And as the Heritage elders are happy to point out, you can`t run an
$82 million organization on $25 donations.

KORNACKI: Yes, I think that is one of the interesting things to watch
on the right now, that tension between the big money -- more sort of
corporate donor class and the grassroots side that wants more of the sort
of all-out partisan warfare.

Anyway, Julia Ioffe, senior editor at "The New Republic".

It`s a great story. I encourage you to read it if you hadn`t.

Thank you for joining us tonight.

What happens when political partisans try to hop on the swing side and
ride it to their side of the aisle? Sometimes they fall off. Hold on for
a bumpy ride, up next.

(COMMERICAL BREAK)

KORNACKI: Last year, 130 million Americans voted for president. In
the final margin, it was Barack Obama with 51 percent plus a little, Mitt
Romney with 47 percent plus a little.

In Virginia, the final margin was Barack Obama with 51 percent plus a
little, to Mitt Romney with 47 percent plus a little.

No other state came this close to the exact national margin. And so,
we can safely say that Virginia is a bellwether state, which is why
Democrats were so excited earlier this month in 2009, Virginia had elected
a trio of Republicans to the three state-wide offices. This year there was
a backlash.

The governor elected in 2009 had been caught up in a scandal and the
candidate Republicans ran to replace him, state Attorney General Ken
Cuccinelli was so far to the right, especially on culture issues, that
scared off the swing voters Republicans have to win in Virginia.

So Virginia instead elected a Democratic governor, Terry McAuliffe.
In fact, elected Democrats to the other two statewide posts as well. At
least it looks that way.

Just today, the race to attorney general went to a recount. But if
the results from election do hold, Democrats will have a lock on Virginia
statewide offices for the first time since 1969.

You might hear national Republicans swearing off the events in
Virginia as not that big of a deal.

But it`s hard to deny it, Virginia is a classic bellwether state, and
it just gave the GOP a warning of what happens when you field far right
candidates in a truly competitive state.

Here is another bellwether state, Colorado. After Virginia, it was
Colorado voters who most closely reflected 2012 voters overall nationwide.
So, you`ve got bellwether Virginia and bellwether Colorado.

And it is fascinating because in Virginia, the state-wide offices have
been held by Republicans. The voters seem to have rejected their way of
governing. But in bellwether Colorado, it is the Democrats that have been
in control.

Governor John Hickenlooper has had the benefit of a legislature
controlled by his own Democratic Party and he`s used that power to sign
major gun reforms and civil unions and new laws about renewable energy.
Then he`s come at something of a political cause.

Back in September, voters recalled two Democrat senators who had
supported the gun reforms, which left Colorado Democrats clinging to a one-
vote majority in the state senate. Then, opponents of the gun laws went
after a third Colorado senator. Her name is State Senator Evie Hudak.
They were about to submit the signatures needed to put her up for a recall
when Senator Hudak resigned.

By leaving now rather than risking the loss of her seat, she gives
Democrats the chance to appoint a replacement and then run that person for
office next year. Colorado Democrats thus have kept their hold on power in
the bellwether state. But this is what it took, it took getting one of
their own to fall on her sword, hoping it doesn`t lead to a bigger backlash
later.

And look at this, Democrat, Mark Udall, he has to defend his U.S.
Senate seat next year in Colorado. He won by 10 points last time. Now, he
is up over his closest challenge by just three.

Governor Hickenlooper, he won his job in 2010 by 14 points. In 2010,
that was a very Republican year, in case you haven`t forgotten. He still
won by double digits in that climate. But now, he is up by just five
points over his possible challengers.

Virginia is very promising bellwether for Democrats. How do they make
sense of what is happening in the bellwether of Colorado?

Joining us is Perry Bacon, he`s the national political editor for "The
Grio" and an MSNBC contributor.

Perry, thanks for joining us.

So, the events today in Colorado were just kind of, to me,
extraordinary to me watch, a state senator resigning and giving up in the
face of a recall, just so her party can control the chamber for another
year.

I wonder, though, what lesson you think Democrats should be drawing
nationally from what`s happening in Colorado right now? Because, as we
say, you looked at Virginia last month, and Democrats said, well, look,
when Republicans put the far right up, we are fine.

But in Colorado, you have Democrats in control and they are pursuing a
Democratic agenda, but it`s really, I`d say, a moderate agenda. And they
are facing an awful lot of backlash for it.

How do you make sense of that nationally if you are a Democrat?

PERRY BACON, THE GRIO: What you`ve seen in Virginia and Colorado is
the candidates who do best are the ones who play down the kind of cultural
issues. I`d say guns in Colorado, talk abortion and contraception, which
Cuccinelli talked about a lot in Virginia.

John Hickenlooper, the governor now of Colorado, ran a very non-
ideological campaign, kind of like what Mark Warner did when he won in
Virginia. And Hickenlooper was a surprise by being so adamant on his gun
control issue, and I think you`re seeing Republican voters there outraged
by that.

What you saw in Hickenlooper`s numbers is that Democrats still like
him. Independents still like him. Republicans went from 26 to 46 in the
last few months. You are seeing a backlash mainly among Republicans that
didn`t care about him before and now are pretty opposed to him. The same
thing you saw in Virginia where Cuccinelli was a much more controversial
candidate than McAuliffe who pretty much ran in the center and won in
Virginia.

KORNACKI: You know, I mean, we are coming up on the one-year
anniversary of Newtown. I think that`s just a few weeks away. Now, you
had the shooting in Aurora, just over a year ago, those are sort of the
events that got Hickenlooper on board with gun control in Colorado. It
becomes sort of a depressing message for Democrats when you look at what`s
happened in the last year for gun control supporters, wherever they are in
the political spectrum, that it could not happen at the national level. It
could not happen in the U.S. Senate and the Democrats in Colorado are
paying such a price for this.

I understand that the point you are making is certainly politically,
when you look at the sort of the third rail that sort of represents culture
in the state like Colorado.

But is there a way, is there a lesson we can draw anywhere in the last
year for how Democrats, for how gun control supporters in a state like
Colorado can pursue that and not pay this kind of a price?

BACON: It looks like from looking at the polls that, Hickenlooper
doesn`t tell a little bit as well, is that background collection are still
supported by a majority of people in Colorado versus the limits on magazine
clips or for whatever reason have been more unpopular. That may be a sign
where background checks are a more palatable issue.

I will say there are two different lessons here is that -- on issues.
I do think Democrats will be more wary of gun control because Colorado is
such a centrist state in the country. But I think if you look at health
care, Medicaid expansion, Terry McAuliffe ran on very hard in Virginia and
he won on that issue in part.

So, I think you`ll see more Democrats being emboldened on the Medicaid
issue in particular next year versus gun control. I do think you`re going
to see a chilling effect.

We`re talking about recalls, important to note. Very few people are
voting in these elections. But I still think you`ve seen a slowing in gun
control up in Colorado, and you saw most states passed it that were
effective, Maryland and New York, for instance. Those are states where
liberals don`t have to worry about any kind of backlash. I think there
will be some chilling right now in Colorado, in states like Colorado.

KORNACKI: That`s right. When you get out of the safely blue states.
That`s the story of our politics these days.

Anyway, Perry Bacon, political editor for "The Grio" and MSNBC
contributor -- thanks for your time tonight.

We will be right back after this.

(COMMERCIAL BREAK)

KORANCKI: Fifty years ago tonight, 50 years ago around this exact
time, nearly every American household that had a TV was gathered around to
watch this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Live from the Capitol in Washington, D.C., NBC
News brings you coverage of President Lyndon B. Johnson`s first message to
the Congress of the United States.

(END VIDEO CLIP)

KORNACKI: It was November 27th, 1963, 50 years ago tonight that
Lyndon Johnson addressed a joint session of Congress for his first time as
president. The nation was still in a state of trauma after the
assassination of John F. Kennedy, just five days earlier.

And while transition of power to LBJ had been smooth, millions of
Americans watching at home that night were wondering the same thing that
NBC`s Chet Huntley wondered allowed just a few days earlier.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Now, the question in the national mind, of course,
is who is Lyndon Johnson?

(END VIDEO CLIP)

KORNACKI: Well, the answer to that question had changed dramatically
in the five days between the death of JFK and Lyndon Johnson`s speech to
Congress that night, because LBJ who awoke in November 22nd, 1963 was
vastly different than the one frantically sworn in as president less than
12 hours later.

Only eight weeks before the assassination, this was the defeated slow
moving, Lyndon Johnson, dressed informally in khakis, meeting with a local
Houston affiliate for an interview at his ranch. The interviewer was Ray
Miller of KPRC TV. Johnson replied to his question with the body language
of a man just going through the motions.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: A lot of people thought when you -- when you gave
up the majority leadership in the Senate to become vice president that you
would find it a comedown. How do you find it?

LYNDON JOHNSON, FORMER PRESIDENT: Well, I can`t imagine why anyone
would think that. I don`t think that, vice presidents can come down from
anything.

(END VIDEO CLIP)

KORNACKI: No one thought Johnson was the second powerful man in
Washington. "Life" magazine profiled the, quote, "number two man in
Washington", they were talking about the president`s brother, Robert
Kennedy, who was perhaps LBJ`s most bitter rival in the administration, in
all of Washington, in all of politics.

But to call them rivals at the moment that would have been a gross
distortion of the concept of rivalry. Johnson had told House Speaker Sam
Rayburn, quote, "being vice president is look being a cut dog." That`s who
LBJ was in the months, weeks, minutes, seconds before the shots rang out in
Dallas.

And for personal indignities aside, Lyndon Johnson back then, back in
pre-Dallas, was also in very serious political trouble. A scandal,
secretary of the Senate`s office was unfolding, one that involved, LBJ`s
protege, Bobby Baker, graft, illicit sex, influence peddling. The Baker
affair sparked new interest on how Johnson had amassed a fortune worth
millions of dollars after 30 years on a government salary.

In November 1963, the powder keg was about to blow. November 22nd,
the presidential motorcade rolling through Dallas, the editors of "Life"
magazine were meeting to delegate assignments and their investigation into
a project they called Lyndon Johnson`s money. The Senate began sniffing
around the Baker controversy. Lyndon Johnson`s shelf life as a national
politician was rapidly expiring. Talk was beginning Johnson would be
bounced from the 1964 ticket by Kennedy.

Once that "Life" story ran, once all that dirty laundry was aired in
the Senate hearing, it will be a no brainer then. It was during that
Senate hearing, though, into the Baker affair, with the documents, invoices
and checks linking the vice president to illicit behavior. It was during
the hearing, some one burst in to say the president had been shot. The
shot radically changed Lyndon Johnson`s life and so many others.

It triggered an instant transformation. He wanted to be president all
his life and he knew what he was supposed to do. He was calm. He was
decisive. He took action.

He told every Kennedy aide that needed them more than President
Kennedy ever had. He brought in congressional leaders, and governors. He
addressed the join session of Congress, 50 years ago tonight.

(BEGIN VIDEO CLIP)

JOHNSON: No memorial, oration, or eulogy could more eloquently honor
President Kennedy`s memory than the earliest possible passage of the civil
rights bill for which he fought so long.

(END VIDEO CLIP)

KORNACKI: Over the last week and a half, we had remembered the 50th
anniversary of JFK`s death for all that was lost and so much was. But it
also ushered in one of the most momentous consequential periods in American
history. It was LBJ who channeled the grief over JFK`s death, who
harnessed his own ability to count votes and twist arms on Capitol to etch
a Civil Rights Act into law, to see through the tax cut bill installed
under Kennedy, to push for his own wildly ambitious war on poverty and to
get his way.

JFK`s death gave way to the LBJ landslide of 1964. It was one of the
most thorough presidential victories ever amassed. It gave us the 89th
Congress, perhaps most productive, influential legislative session in
American history -- a Congress that set a standard for sweeping change that
no future Congress has lived up to.

John F. Kennedy`s tragic death gave rise to what we might today
remember as one of the greatest presidencies in history, were it not for a
military entanglement in Southeast Asia, an entanglement that would come to
eclipse, to erase so much of what LBJ achieved on the domestic front. But
all that was still to come. In 1964, at the national Christmas tree
lighting, Johnson said, quote, "These are the most hopeful times in all the
years since Christ was born in Bethlehem."

The events that would lead a president say a thing like that, that
would make a country believe him when he said, that would make a Congress
act as if it were the case -- those events began 50 years ago tonight.
That speech to Congress marked the start of what was one of the most
consequential presidencies in modern American history from a man whose rise
to power as of literally five days earlier was essentially unfathomable.

That does it for us tonight. Be sure to catch my show this weekend,
Saturday and Sunday, from 8:00 to 10:00 p.m. Eastern Time.

And now, it`s time for "THE LAST WORD WITH LAWRENCE O`DONNELL".

Have a great night.

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

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