updated 1/10/2014 11:06:13 AM ET 2014-01-10T16:06:13

THE LAST WORD WITH LAWRENCE O`DONNELL
January 8, 2014

Guests: Barbara Buono, Hunter Walker, Jonathan Dienst;

LAWRENCE O`DONNELL, MSNBC HOST: OK, make sure the kids are gone to bed,
all right? Because we`re going to talk Jersey politics Chris Christie
style and, you know, the language can get kind of colorful.

(BEGIN VIDEOTAPE)

MAYOR MARK SOKOLICH, FT. LEE, NJ: David Wildstein deserves an ass
kicking, OK?

UNIDENTIFIED FEMALE: It`s politics New Jersey-style.

UNIDENTIFIED MALE: Some newly released emails.

UNIDENTIFIED MALE: New materials suggest that state officials
actually shut down traffic.

UNIDENTIFIED MALE: Show Christie`s office is closely involved with
the closures.

UNIDENTIFIED FEMALE: Deliberately creating a huge traffic jam.

UNIDENTIFIED MALE: This is now in his office.

UNIDENTIFIED MALE: Newly obtained e-mails sent from Governor
Christie`s deputy chief of staff.

UNIDENTIFIED MALE: Christie`s deputy of chief of staff Bridget Anne
Kelly.

UNIDENTIFIED MALE: It reads, "Time for some traffic problems in Fort
Lee".

UNIDENTIFIED FEMALE: Wildstein replied a minute later, "Got it."

UNIDENTIFIED MALE: To punish a political opponent of the governor.

UNIDENTIFIED MALE: It`s criminal investigation.

UNIDENTIFIED FEMALE: Fort Lee saw four days of gridlock.

SOKOLICH: We have families that were looking for emergency services,
to respond to calls.

UNIDENTIFIED FEMALE: A bridge too far.

SOKOLICH: Thousands of kids were late for the first day of school.

UNIDENTIFIED MALE: Governor Christie stated repeatedly that his
staff had nothing to do with those lane closings.

UNIDENTIFIED MALE: This governor has a lot of explaining to do.

REV. AL SHARPTON, MSNBC HOST: Governor Christie put out this
statement, "misled by a member of my staff, made without my knowledge."

STEVE KORNACKI, MSNBC HOST: That becomes an indictment of his
leadership in a different way.

UNIDENTIFIED MALE: Can we expect the pile on to start here pretty
soon?

UNIDENTIFIED MALE: He has national ambitions.

ANN COULTER, POLITICAL COMMENTATOR: If you don`t run Chris Christie,
Romney will be the nominee and we`ll lose.

UNIDENTIFIED MALE: 2016 is still two years away.

SOKOLICH: I`m embarrassed. I`m embarrassed for the entire state of
New Jersey.

UNIDENTIFIED MALE: Either way, it doesn`t bode well for this
governor.

COULTER: Christie is off my list.

(END VIDEOTAPE)

O`DONNELL: "The Bergen Record" released newly obtained e-mails and
texts today involving Chris Christie`s deputy chiefs of staff and two of
his former top executives a the Port Authority, all pointing to possible
political retribution three weeks before the lane closures on the George
Washington Bridge, Bridget Anne Kelly, one of three deputies on Christie
senior staff, wrote to a Port Authority official David Wildstein, "Time for
some traffic problems in Fort Lee". Wildstein wrote back, "Got it."

Wildstein did order lane closures which caused major problems for
Fort Lee residents and as "The Bergen Record" reports tonight, emergency
responders were delayed in attending to four medical situations, including
one in which a 91-year-old woman lay unconscious. That woman later died.

The first morning of the lane closures, Fort Lee mayor made Mark
Sokolich made numerous calls to Port Authority officials, inquiring about
what was going on. Bridget Anne Kelley e-mailed Port Authority executive
David Wildstein again, "Did he call him back? Wildstein replied, "Radio
silence. His name comes right after Mayor Fulop," an apparent reference to
Jersey City Mayor Steven Fulop, who also claims Christie administration
retaliated against him because he also did not endorse the governor for re-
election.

The Fort Lee Mayor Sokolich reacted to today`s news this way.

(BEGIN VIDEO CLIP)

SOKOLICH: Don`t do me any favors. Don`t reach out for me. You need
to reach out to the families who were waiting for ambulances taking three
times longer to get there. You need to reach out to the thousands of
families that couldn`t get their kids to school an and you need to reach
out and figure out how much this cost Fort Lee so we can get a
reimbursement check from Trenton. That`s what I think we need to do.

David Wildstein deserves an ass kicking, OK? Sorry, there I said it.

(END VIDEO CLIP)

O`DONNELL: Well, I for one have a new favorite mayor.

Wildstein, who resigned last month, had been subpoenaed to testify
tomorrow before the assembly transportation committee, but he filed a
lawsuit in state court today that might stop that from happening. And
Chris Christie canceled his only public event today and the normally
talkative Christie only issued this written statement.

"What I`ve seen here for the first time is unacceptable and I am
outraged and deeply saddened to learn that not only was I misled by a
member of my staff, but this completely inappropriate and unsanctioned
conduct was made without my knowledge. One thing is clear. This type of
behavior is unacceptable and I will not tolerate it because the people of
New Jersey deserve better. This behavior is not representative of me or my
administration in any way and people will be held responsible for their
actions."

Joining me now, Richard Wolffe, MSNBC.com executive editor, New
Jersey Democratic State Senator Barbara Buono, who ran against Christie for
governor last year, and Hunter Walker, national affairs reporter for
"Talking Points Memo", and this program`s senior George Washington Bridge
correspondent.

Hunter, just to backtrack here on the story, the theory of the case,
and it`s the stupidest case I`ve ever heard, is that they were going to
retaliate against the mayor of Fort Lee, New Jersey, a Democratic mayor,
for not endorsing the Republican governor, as Barbara can tell us, too many
Democrats got in line with this Republican governor`s reelection.

And the way they were going to retaliate was not punish him, but
punish New Jersey driver`s in cars using the George Washington bridge who
come from all over New Jersey, including people who come from Pennsylvania,
and people who were driving from all over -- I mean, it`s this -- the idea
that you could punish an individual politician in New Jersey, local
politician by slowing down the George Washington Bridge is insane. But
that`s what got us here.

HUNTER WALKER, TPM: Right. And, you know, there`s so many damning
revelations from the set of documents this morning that it`s really hard to
settle on just one. But one quote that I find really interesting is, you
know, this all ended when one of Governor Cuomo`s appointees on the Port
Authority became aware of the situation. And in an e-mail to one of
Christie`s top aides, the guy who ordered these closures, who was
Christie`s high school classmate, said, "New York just gave them their
lanes back. We`re going to go, quote, `appropriately nuts`."

So I love this idea that in Jersey politics there`s a level of going
nuts that`s somehow appropriate. So, certainly far from any idea of good
government I`ve heard of.

O`DONNELL: Senator Buono, I want to read you one exchange they found
in these texts. It alludes to the problem, the school buss were having
trouble getting through the traffic. And this is a text of Wildstein. "Is
it wrong that I`m smiling?" The recipient of the text message responded to
Wildstein, "No".

Wildstein wrote in response, the person replied to Wildstein, "I feel
badly about the kids, I guess." Meaning the kids on the school buses, to
which Wildstein said, "They are the children of Buono voters."

Your reaction to that?

STATE SEN. BARBARA BUONO (D), NEW JERSEY: What kind of person says
that? I have to ask you, Lawrence. I mean, I`m not surprised. I knew
that this was going to lead to Chris Christie back in September. Because
this is an administration, it`s a paramilitary organization. People don`t
go to the bathroom without asking his permission.

But I have to tell you, those quotes were startling to me. They were
horrifying that somebody would talk about children in that way. It`s an
abuse of trust of the public. I`ve been in public office for 21 years.
And I spent every day trying to win the people`s trust and this has just
shattered it.

O`DONNELL: It is stunning. It is cruelty to children. It is
abusive to children.

But like everything else in this story, it`s stunningly stupid. The
idea that you could punish exclusively the children of Buono voters on that
school bus, that there were no Christie voters on that school bus?

BUONO: Arrogant.

O`DONNELL: But it`s wildly stupid.

Richard Wolffe, I have spent some time today. We haven`t been able
to do it -- to get the name of the 91-year-old woman who was delayed
medical treatment that day because of the traffic jam, and eventually died.
And we don`t know whether she died because of a delay in treatment.

But in politics, that`s not the way they play this game. In
politics, she, when we have her name, is going to become the Willy Horton
of Chris Christie`s presidential campaign. His opponents are going to pin
that name on him. This woman is dead because of action taken by the
Christie administration.

RICHARD WOLFFE, MSNBC.COM: Yes, it`s very easy to look at this and
say, the plumbers in Watergate, that was very --

(CROSSTALK)

O`DONNELL: Stupidity all the way through.

WOLFFE: In any case, it breaks through. People don`t understand
about the struggle to lift education standards. They don`t understand
about state budgets and jobs come and go. But they do understand this kind
of story. It breaks through all politics. It breaks through the kind of
people who only tune in to this kind of network. And it reaches into the
late night comedy shows. It`s something that people can have understand at
a very visceral level. Not because they struggle with bridges but because
they understand the importance of emergency vehicles getting through.

And remember, Chris Christie was sailing to re-election. He had his
endorsements lined up. This was so far beyond the pale. It was not just
stupid, it was unnecessary.

O`DONNELL: I want to get a translation from our New Jersey experts
here of this particular sequence here where Wildstein was exchanging
messages with Bill Stepien, Christie`s campaign manager, about a "Wall
Street Journal" story about local official complaints. He Stepien reacted
to the article saying, "It`s fine. The mayor is an idiot, though. Win
some, lose some."

Wildstein wrote back, this part I don`t get, "I had empty boxes ready
to take to work today, just in case. It will be a tough November for this
little Serbian." What`s that about? The empty boxes thing?

WALKER: Well, you know, that was the initial coverage that was going
on in this. When you have Mayor Sokolich of Fort Lee quoted, sort of
implying that he thought this was punitive in nature. That was the canary
in the mine that let us know this was a problem. And, you know, it shows
that --

O`DONNELL: Is this Wildstein saying if there was going to be a
negative article in "The Wall Street Journal," maybe he would have to get
fired and fill up those empty boxes and get out of his office?

WALKER: Exactly.

(CROSSTALK)

WALKER: It shows he had a fairly normal response that his job might
be in jeopardy. And if I`m -- Chris Christie and his administration hadn`t
supported him, as that exchange from the campaign manager shows he did from
the get-go, his job might have. And it probably would have anywhere else.

O`DONNELL: Senator Buono, you ran against one of the most talkative
governors in the United States of America. I think the most talkative
governor, always available to the press about everything. Not an audible
out of the man today. He`s done, as far as we know, nothing about this
today.

I don`t see what on the basis of this information prevents him from
firing this Kelly publicly today.

BUONO: And he should. And I`m going to tell you something, if he
were U.S. attorney today, he would have conducted an investigation into
this already. That`s why I called on the U.S. Department of Justice to do
just that, because there is sufficient evidence to look into the
possibility of criminal acts were committed here.

I mean, I think it goes beyond a bridge closing. This is an issue of
character. This is a governor that has a reputation for utilizing the
levers of power to exact political revenge.

And this is something that people, not just of New Jersey, but the
people of the United States of America need to know about. He`s somebody
who wants to lead our nation and be the chief executive over the largest,
the most powerful military force in the world. And he can`t be trusted to
manage the busiest bridge in the world.

O`DONNELL: Richard Wolffe, I`ve never seen a smoking gun like Ms.
Kelly`s thing that says it looks like we need to close the bridge today,
that one.

She works for him directly, completely fireable by him in instant.
Why she is still employed tonight is beyond my wildest dreams. Tomorrow,
it seems to me Chris Christie`s political career hangs in the balance
tomorrow by what action he will take. People can say around the country,
it`s a traffic jam. It`s not a big deal.

Well, when they see the 30-second commercials about the 91-year-old
woman in the presidential campaign, they`ll think it`s a big deal. But
also, it`s all entirely now about what does this decisive man do, this
tough-talking, quick-acting, decisive man. He couldn`t figure out what to
do and he had more than 12 hours to figure it out.

BUONO: I take issue with that. I think it depends really, people
need to know what this governor knew and when he knew it.

O`DONNELL: That, too. But at a minimum. Let`s just for the moment
believe or accept for the moment this unbelievably thin read of this
defense, which is he`s hearing about this for the first time.

Those are the key words in his written statement today, the first
time, which is very hard to believe. But let`s accept it for moment and
say going forward, what does he do tomorrow? What does he have to do
tomorrow and what time does he have to do it? How many hours can he let it
go by?

WOLFFE: It`s already too late. For the crisis manage, look, you can
be shocked there`s gambling in Casablanca, but if your reputation is you`re
a great manager, if your reputation is you can reach across the party
divide and you`re out there punishing Democrats, too, and not just
Democrats, they just refused to endorse you, then your two pillars of your
entire reputation has crumbled. So, reaction to the crisis is one thing,
but how do you repair your reputation? That`s harder.

O`DONNELL: Richard Wolffe, Senator Barbara Buono, and Hunter Walker
-- thank you all for joining me tonight.

Coming up, Steve Schmidt joins me to talk about Chris Christie and
why today was not just a bad day for Chris Christie. It was also a bad day
for Rand Paul.

And in the rewrite tonight, what the Washington media is not telling
you about the new book about the Obama administration by former Defense
Secretary Robert Gates.

And later, a shocking conspiracy by scores of New York City police
officers to defraud the government of hundreds of millions of dollars
through fraudulent disability claims, linked to their service on 911. They
actually got away with using 911 for their own personal gain until they got
arrested yesterday.

(COMMERCIAL BREAK)

O`DONNELL: Former Arizona Congresswoman Gabby Gifford went sky
diving today three and a half years after one of our very well equipped
mass murderers tried to assassinate her, killing six people and wounding 12
others. Vice President Joe Biden called before, to wish her luck.

Gabby Giffords has gone sky-diving before, but hasn`t jumped out of a
plane since the shooting. You can watch her jump tomorrow morning on "The
Today Show."

Up next, a bad day for another Republican who wants to run for
president. Rand Paul`s new problem is next.

(COMMERCIAL BREAK)

O`DONNELL: Governor Chris Christie is not the only potential 2016
Republican presidential candidate to have a very bad day. Rand Paul woke
up to a "Wall Street Journal" editorial calling him, quote, "unsuitable to
be commander-in-chief," following Rand Paul`s calls for leniency for Edward
Snowden. The conservative editorial board of "The Wall Street Journal"
wrote, "Arguing that Edward Snowden is some kind of national hero shows an
un-seriousness about national security that would make him unsuitable to be
commander-in-chief."

Rand Paul is also getting some backlash from more hawkish members of
Congress, including the former head of the House Homeland Security
Committee, Republican Congressman Peter King who said this earlier this
week.

(BEGIN VIDEO CLIP)

REP. PETER KING (R), NEW YORK: When we have honest differences where
the policies are, Rand Paul is playing on some sort of libertarian --

UNIDENTIFIED FEMALE: Fear mongering.

KING: Scaremongering, isolationism, and rather using arguments as
people could well do, he`s resorting to fear, he`s appealing to the lowest
common denominator.

(END VIDEO CLIP)

O`DONNELL: Senator Paul responded to Congressman King`s criticism by
saying this.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL (R), KENTUCKY: I think when people are so over-the-
top like that, and really so bombastic that most people discounted I think
as probably, it`s taken for what`s it worth. And see, the thing is it`s
lost in a lot of people as I am in favor of the NSA. I am for spying on
terrorists. I just think it needs to discriminate in the sense that you go
to a judge and the reason that we separated police power from judicial
power is to have some checks and balances. And people who don`t know the
importance of separating the judiciary from the police power really I don`t
think are thoughtful people.

(END VIDEO CLIP)

O`DONNELL: Joining me now is Steve Schmidt, MSNBC political analyst
and former senior adviser to the McCain campaign. Steve, I don`t want to
get into the Edward Snowden issue in particular. What I`m interested in
here in terms of a Republican presidential campaign, how this issue plays.

And what we saw today was a very important side of the Republican
Party speaking in that "Wall Street Journal" editorial, saying if you`re
for leniency for Snowden, then you`re unfit for the presidency. What I`m
interested in is how this works on a Republican debate, primary debate
stage. And who will be playing what roles in this debate?

STEVE SCHMIDT, MSNBC POLITICAL ANALYST: Look, I think that Rand Paul
more and more is assuming the role that his father played, for example,
during the 2008 presidential debates where he was an outlier. All the
candidates agreed that Rand Paul was out there on conspiracy theories and
basely other issues. And Rand Paul just frankly had a bad 2013 when you
look at the plagiarism issue, when you look at the Southern Avenger, the
person who wrote all the outlandish columns working in his office.

You know, he`s demonstrated, I think, over the course of the last
year he has difficulty running a U.S. Senate office, let alone any
prospects to be commander-in-chief. And certainly inside the Republican
Party, there`s not a great deal of sympathy for Edward Snowden, or is there
much of a constituency in the Republican Party who wants to see him get
clemency?

That being said, I think there are legitimate fourth amendment
issues. I`m certainly not a person who supports the untraveled national
security state in the name of security that we should have all these
invasions of privacy.

So there are legitimate issues at stake here, but I think Rand Paul
has demonstrated himself increasingly as a very flawed messenger. And "The
Wall Street Journal" editorial board is a powerful messenger. It`s a
powerful voice inside the Republican Party in terms of shaping the debate
around a primary process.

O`DONNELL: Steve, the thing that always interests me about Ron
Paul`s campaigns is that he did say, he went up on those stages, and he
said very brave things to Republican audiences that Republicans audiences
didn`t want to hear. Very brave anti-war statements, the kind of thing
that Rand Paul would also I think would also be willing to say. The big
difference it seems to me so far is that no one ever thought that Ron Paul
had any chance of winning a nomination or winning any real collection of
delegates in the process.

And so, it was easier for Ron Paul to be brave because he was never
actually running for president. The perception is that Rand Paul will
really be running for the nomination and so that`s what interest me about
him being consistent on some of these points that cost his father. Now, is
there any value in the Republican primary for voters to look at it and go
well, I don`t agree with him on this Snowden thing, but I admire him
sticking to his principles on this?

SCHMIDT: We`ll see how he does in the debates. He`s going to needs
to make his arguments much more coherently than he already has. Earlier
this year, for example, he got into a tussle with Chris Christie and Chris
Christie came out on top on that.

So, when he gets into the combat arena of the Republican presidential
debate process, we`ll see how he does. Can he make arguments? Can he
advance his position? Can he draw people in to positions that have
typically been outliers inside the Republican Party?

Now, I would have argued, and I dare argued a year ago I thought he
was going to be a very serious candidate for the nomination, one of the top
three. And I think he`s fallen off that perch over the course of a very
bad political 2013.

O`DONNELL: Steve, to Chris Christie, he`s let this story hang out
there all day today getting worse by the hour, without -- literally without
saying a word, very uncharacteristic reaction by Christie. He`s got
someone on his staff caught in the texting e-mails saying --

SCHMIDT: Red handed.

O`DONNELL: Red handed. It`s time to cause problems on that bridge.

What should Christie have done today? What does he have to do
tomorrow?

SCHMIDT: He should have fired her today. He should have fired her
hours ago. And he needs to clean house with every person who`s involved in
this.

Look, there`s exactly zero evidence implicating President Obama in
the IRS abuse of conservative groups. There`s no evidence at this point
that Chris Christie knew anything about this.

There is substantial evidence that people close to him committed an
outrageous and egregious abuse of power. And so in this situation, there`s
great opportunity for Chris Christie. And there`s great peril for Chris
Christie.

The brand of Chris Christie demands that he cleans house. That he
hold people accountable. This is what people are sick and tired of,
whether we`re talking about the people that caused the financial crisis,
the people that have mismanaged wars, the people that have caused so much
problems in Washington.

So, he`s got a big day ahead tomorrow. When you run for president,
you don`t have the option of hiding out for a day when there`s a bad news
story.

O`DONNELL: Well, he certainly cannot fire Miss Kelly until he knows
for sure that Miss Kelly is going to back him up on the public statement
that he knew nothing about this before today.

Steve Schmidt, thank you very much for joining us tonight.

SCHMIDT: Great to be with you, Lawrence.

O`DONNELL: Coming up, Republicans in the war on poverty 50 years
later.

And in the rewrite, an explosive day at the White House, press
briefing room. Explosive, as far as the reporters were concerned anyway.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This administration today here and now declares
unconditional war on poverty in America.

SEN. MARCO RUBIO (R), FLORIDA: Five decades and trillions of dollars after
President Johnson first announced the war on poverty, the results of the
big government approach are in.

(END VIDEO CLIP)

LAWRENCE O`DONNELL, MSNBC ANCHOR: In the spotlight tonight, Republicans
and the war on poverty. Fifty years ago tonight, Lyndon Johnson used his
first state of the union address to declare war on poverty. And since
then, Republicans have used the war on poverty to attack Democrats. Of
course, you won`t hear Republicans attacking the war on poverty`s single
biggest big government program.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We must provide hospital insurance for our older
citizens financed by every worker and his employer under Social Security.

(END VIDEO CLIP)

O`DONNELL: That`s right. That was Medicare the president was talking
about. That is the war on poverty`s most successful and most popular
socialist program. Republicans don`t mention that when they talk about the
war on poverty`s alleged failure. President Johnson`s top legislative
aide, Joseph Califano, wrote in the Washington monthly in 1999, if there is
a prize for the political scam of the 20th century, it should go to the
conservatives for propagating as conventional wisdom that the great society
programs of the 1960s were misguided and failed social experiment that
wasted taxpayers` money. In fact, from 1963 when Lyndon Johnson took
office until 1970, as the impact of his great society programs were felt,
the portion of Americans living below the poverty line dropped from 22.2
percent to 12.6 percent. The most dramatic decline over such a brief
period in the 20th century.

The current poverty rate in America in the wake of the financial crisis and
recession is 15 percent, thanks in part, it`s been held down thanks in part
to programs like food stamps, also enacted by Lyndon Johnson.

Today, in a speech at the capitol, Marco Rubio announced his anti-poverty
program.

(BEGIN VIDEO CLIP)

RUBIO: What I am proposing today is the most fundamental change to how the
federal government fights poverty and encourages upward mobility since
President Johnson first conceived the war on poverty 50 years ago today.

I am proposing that we turn over Washington`s anti-poverty programs and the
trillions that are spent on them to the states. Our anti-poverty program
should be replaced with a revenue neutral flex fund. We will streamline
most of our existing federal anti-poverty fund into a single agency. Then
each year these flex funds would be transferred to the states so they can
design and fund creative initiatives that address the factors behind
inequality of opportunity.

(END VIDEO CLIP)

O`DONNELL: Joining me now, Jarrod Bernstein on budget and policy
priorities. He was the chief economist to vice president Biden from 2009
to 2011.

Jared, your reaction to Marco Rubio`s battle against poverty.

JARED BERNSTEIN, MSNBC CONTRIBUTOR: Well, there were aspects of his
diagnosis that actually, I thought were pretty strong. He talked about the
increase in inequality and he worried about immobility, the difficulty that
folks at the bottom end of the income scale have getting higher up on that
scale. And often times, Republicans won`t even engage on those issues. I
think they`ve kind of been pushed in that direction. So I was glad to hear
him talk about that in his diagnosis.

His prescriptions, I felt were way off point and antithetical, really, to
the goals he`s articulating. If you were -- by the way, this revenue
neutral flex fund stuff, that`s a block grant. That means that instead of
the federal government being able to ramp up its response to recessions, as
we just saw, and was so important, as you mentioned in your introduction,
to holding down the poverty rate over the deepest recession since the great
depression, that function, that countercyclical function would be gone in
his revenue neutral flex funds. And the idea that you would take that
safety net function out of the picture is a huge step backwards.

O`DONNELL: Let`s talk more generally about the federal government`s affect
on poverty in this country. The Social Security act of 1935 was, in fact,
an anti-poverty program. At that time, the elderly were the most
impoverished in our society. And that problem was pretty effectively dealt
with through Social Security. And then the combination of the 1960s with
Medicare and both of those programs, Social Security and Medicare expanded
after they were introduced. We were adding elements to those programs to
make that safety net even stronger. And both of those programs are always
ignored when we talk about federal government intervention in poverty.

BERNSTEIN: Absolutely. I mean, anyone who wants to use the Reagan quip
and certainly Paul Ryan, Rubio, they all like to say this about losing the
war on poverty, should consider the following statistics. If you take
Social Security out of the picture, 44 percent of the elderly would be poor
today, 44 percent. Add Social Security back into the picture as it is,
that goes down to nine percent. Please explain me somehow we lost the war
on poverty when we are actively reducing elderly poverty from 44 percent to
nine percent. And that is just one example.

O`DONNELL: And Jared, just to be clear on this, those people are not
living on the program that FDR introduced. They are living on an extremely
expanded program based on what FDR introduced, expanded by liberals in
decades after that.

BERNSTEIN: By the way, including in Johnson`s great society, there were
significant expansions to Social Security in `64 and `65. If you look
today at the extent of poverty reduction through the types of programs that
were introduced and expanded in the great society, you`ll see very, very
large gains.

Now, that doesn`t mean we`re anywhere out of the wood and that nobody is
experiencing hardship, of course. The problem now has a lot more to do
with inequality, with globalization, with economic trends, wage stagnation,
that have beset low income people for a long time. We`re actually doing a
decent job in helping to offset some of the economic trends, but the
economic trends themselves are more poverty inducing.

O`DONNELL: What Republicans have done with the phrase war on poverty is
introduce the notion that a war is only successful when it is 100 percent
successful. So if there is one poor person left which is to say in the
civil war, if there was one confederate soldier left fighting then the war
wasn`t over. And that`s what I think is inspiring their reaction to it, is
they get to say look, there`s still some poor people so the war on poverty
failed.

BERNSTEIN: I think you`re right. I mean, I think that`s why in many ways,
this idea of a war on poverty made sense in 1964, 50 years ago in that
building back there, in terms of legislative initiative. I think in
evaluating the nuances that you and I have been discussing, it`s probably
not the best metaphor.

O`DONNELL: Jared Bernstein, thank you very much for joining me tonight.

BERNSTEIN: Thank you.

O`DONNELL: Coming up in "the rewrite," explosive readings from the
explosive memoir, written by the former secretary of defense, Robert Gates.
Well, explosive is what the White House press corps calls the book. But
finding the explosive parts isn`t as easy as they think.

(COMMERCIAL BREAK)

O`DONNELL: Next in "the rewrite," what the Washington media is not telling
you about the new book about the Obama administration by former defense
secretary Robert Gates.

(COMMERCIAL BREAK)

O`DONNELL: Time for tonight`s explosive "rewrite."

You know, as in the explosive statements about President Obama in the new
book by his former defense secretary Robert Gates.

(BEGIN VIDEO CLIP)

JONATHAN KARL, ABC NEWS REPORTER: These are some explosive statements that
he has made about the president.

(END VIDEO CLIP)

O`DONNELL: OK, here we go. Here are some of those explosive statements
about President Obama.

The troop increase that Obama boldly approved in late 2009 was the right
decision providing sufficient forces to break the stalemate on the ground,
rooting the Taliban out of their strong holds while training a much larger
and more capable Afghan army. OK. Wait. Sorry. That`s not one of the
explosive ones. That`s one of the fan boy statements that Gates makes
about President Obama throughout the book.

I know I`ve got -- OK, here we go. Here`s one of the explosive statements.
President Obama`s decision to send Navy SEALs into Osama bin Laden`s
compound was, quote, "one of the most courageous decisions I had ever
witnessed in the White House." OK. Sorry, that`s another one of those fan
boy comments from Gates. I know I`ve got explosive stuff here somewhere.

All right, here we go. Right here. One of the big bomb right here.
Hillary told the president that her opposition to the 2007 surge in Iraq
had been political because she was facing him in the Iowa primary. The
president conceded vaguely that opposition to the Iraq surge had been
political. To hear the two of them making these admissions and in front of
me was as surprising as it was dismaying.

OK, to be surprised that a presidential candidate, especially a
presidential candidate named Clinton would make decisions that were
political is one of the many displays of shocking political may obtain by a
secretary defense. But the beltway media is not shocked by Gates` since
political na‹ve (ph) and they are glossing over that Hillary part of the
statement and focusing on the president admitting that his opposition to
the Iraq surge was political. That is the way most of the beltway media
reads that statement even though that is not what the statement says.

Here is the right way to refer to that statement.

(BEGIN VIDEO CLIP)

CHUCK TODD, NBC NEWS CHIEF WHITE HOUSE CORRESPONDENT: Can you comment on
the inference that secretary Gates has in the book that both secretary
Clinton and President Obama admitted their opposition to the Iraq surge
that politics played a role in the Iraq surge. There was an inference
there that the president was also engaging in the discussion.

(END VIDEO CLIP)

O`DONNELL: That`s right, Gates does not come out and say that President
Obama said that his opposition to the Iraq surge was political. And you
know Gates would say that if he could. That`s what he said about Hillary
Clinton. Hillary Clinton told the president that her opposition to the
surge in Iraq had been political.

Gates is very clear when he wants to be in this book. And surely, he would
have written the identical sentence about President Obama if he could. He
would have written the president conceded that his opposition to the Iraq
surge had been political. Instead he writes the president conceded vaguely
that opposition, not his opposition, that opposition to the Iraq surge had
been political.

All Gates needed was one word to pin this on President Obama, the word his.
Just insert the word his before his opposition. The president conceded
that his opposition to the Iraq surge had been political, but Gates doesn`t
do that. Gates deliberately keeps that sentence very vague. He actually
uses the word vaguely in relation to the president in the that sentence.
And so, there is nothing there. Except a political observation the
president was apparently making about who knows, others perhaps.

There is no doubt that some of the opposition to the Iraq surge was
political. Some politicians are political, you know, about everything.
The Gates book talks about arguments within the administration over policy
concerning Afghanistan. And the beltway media pretends that it is
shocking, like I mean, explosively shocking. There couldn`t possibly be
arguments within the White House.

Here is one of the explosive statements that Gates makes about that.
Quote, "the continuing fight over Afghanistan`s strategy in the Obama
administration led to what? Unnecessary casualties on the battlefield?
No.

The continuing fight over Afghanistan strategy in the Obama administration
led to a helpful, steady narrowing of our objectives and ambitions. A
helpful, steady narrowing of our objectives and ambitions. Helpful because
clear objectives and achievable ambitions are what the military always
wants.

They don`t want grandiose unachievable objectives. And there`s Robert
Gates saying that the arguments, the actual arguments within the
administration over Afghanistan strategy were helpful, but the beltway
media hasn`t read that line yet.

Now, let`s go back to that explosive reporter who`s all excited about the
explosive statements.

(BEGIN VIDEO CLIP)

KARL: These are some explosive statements that he has made about the
president. This is not some outside critic. This was one of his most
important, if not most important national security adviser, the guy he
chose to keep on to run the Pentagon. He says that there was a suspicion
and distrust by senior -- of senior military officers by senior White House
officials including the president and the vice president and this became a
big problem for him.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Again, I think I just read to you
-- you have to take the full picture here, John. And I would say on that
matter, I think the American people expect that their commander-in-chief
listened to all of his advisers, civilian and military, when it comes to
discussions and debates about matters of war and peace and decisions that
affect the lives of our men and women in uniform and that`s how it should
be.

(END VIDEO CLIP)

O`DONNELL: That reporter isn`t old enough to remember that trusting the
generals, trusting senior military officers as he puts it, was the worst
mistake that many presidents have made including, of course, President
Kennedy. That led to Kennedy`s disastrous and complete failure of the bay
of pigs invasion in Cuba. Trusting the generals and his secretary of
defense was the worst mistake that president Johnson made in what was
America`s worst unnecessary war.

President Nixon continued to make that same mistake in Vietnam after
president Johnson trusting the generals in that hopeless war, wasted 58,220
American lives in Vietnam. We lost that war that the generals always told
us we were winning. Week after week, they told us we were winning.

We achieved nothing in Vietnam. And we were driven out after the generals
told us we were winning. We do not elect presidents to trust generals. We
do not elect presidents to trust anyone. We elect presidents to challenge
everyone working in government to find the best available solutions to the
problems presidents face on a daily basis. Some of their advisers will be
right one day and very wrong the next. This president knows that.
Everyone working in the White House knows that. Except some of the people
whose only mission in the White House is to try to figure out how to ask
explosive questions when the cameras are rolling and the White House press
briefing room.

(COMMERCIAL BREAK)

O`DONNELL: See this picture? Prosecutors want to use it to proves that
this guy is not crazy. That`s next. Does he look crazy to you?

(COMMERCIAL BREAK)

O`DONNELL: Eighty members of the New York City police department and fire
department were among the 106 arrested Tuesday for allegedly faking mental
illness in a $400 million disability scandal. "The New York Post"
presented the story this way on its front page with a picture of former New
York city police officer Glen Lieberman who is accused of defrauding the
government of over $175,000 by claiming that he suffers from depression and
panic attacks after working at ground zero on 9/1 1. But according to the
"New York Post," he was never actually at ground zero. The prosecution, of
course, probably intends to use this photograph of Glen Lieberman riding a
jet ski to prove that he is not disabled by mental illness, but I don`t
know. His defense lawyer might just use that very same photograph to prove
that he really is completely mentally ill.

Joining me now, Jonathan Dienst, the chief investigative reporter for WNBC
New York who has been following this story.

Jonathan, this is a -- I mean, we`ve seen small versions of this in
different places around the country. This is a gigantic version of this
type kind of fraud.

JONATHAN DIENST, CHIEF INVESTIGATIVE REPORTER, WNBC NEW YORK: This is just
the beginning. Just in the attorney side then announced the 106 people
charged in just the last 24 hours. There could be as many as 900 others
involved in alleged scheme. So this is just the beginning. All former
police officers, firefighters, you name it, city workers who are all
allegedly went to the same (INAUDIBLE), about four of them two lawyers, two
former cops, teaching them, showing them how to fill out forms according to
prosecutors and claim that they were totally mentally ill, unable to walk
around the corner, face crowds, do any sort of job. And yet collect
$30,000 to $50,000 a year. And you have some of these former officers
collecting as much as $200,000, $300,000 before the scam was allegedly.

O`DONNELL: And what the "New York Post" is filled with today is
photographs of these guys doing all sorts of active things, one of them
piloting a helicopter, this guy on the jet ski. All sorts of stuff that
they put up on facebook telling the story of their own lives.

DIENST: We have these picture, we have video of a martial arts instructor.

O`DONNELL: Totally disabled martial arts instructor.

DIENST: Not only mentally disable, it is physical. He claimed both. He
was getting disabilities for both. And he`s there on stage on You Tube
videos attacking three guys and it`s extraordinary. And other guys, fear
of crowds, fear of people, couldn`t leave his home, and he`s selling
Canolis (ph) at the festival on video, on pictures. He`s done interviews
in the media according to prosecutors.

O`DONNELL: And these are cops who, you know, would think about how do I
get away with this. It`s amazing. And, you know, it`s easy to laugh
about, but these guys ruined the system for everybody. There were
legitimate disability claims out there that now become questioned because
of these guys.

DIENST: Look, this has been going on since 1988, if prosecutors are to be
believed. And also what is most troubling according to the district
attorney then is that they took advantage of 9/11. So, many of these guys
allegedly said I was there when the planes hit. I was working (INAUDIBLE).
And according to district attorney Vance there were nowhere near ground
zero.

O`DONNELL: Just unbelievable. Thank you, Jonathan Dienst

Chris Hayes is up next.

END

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