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All In With Chris Hayes, Tuesday, January 28th, 2014

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ALL IN with CHRIS HAYES
January 28, 2014

Guests: Sherrod Brown, Barbara Lee, Heather McGhee

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

And at this very moment, President Barack Obama and his speechwriters have
just put the finishing touches on what will be the president`s fifth State
of the Union Address. The House of Representatives will begin filling
shortly with members of both houses and both parties, along with invited
dignitaries, military officials, members of the Supreme Court, and ordinary
citizens who`ve been asked to attend.

Members of all three branches of government convene on this night at a time
when the worst years of violent, terrifying war and spiraling financial
chaos are behind us, but at a moment of historic levels of political
polarization, when a majority of the nation`s citizens view us as on the
wrong track. With trust in Congress, not to mention all of America`s
pillar institutions at or near historic lows.

The president approaches the podium on this night to address a populous
that remains restive, frustrated -- a nation in which too many Americans
remain out of work for too long. Where wages are stagnating or declining,
where many are in poverty, and a society that is being stretched to its
breaking point, as a smaller and smaller few manage to capture more and
more of the nation`s impossible bounty.

So tonight, when the president speaks to what he calls a defining issue of
our time, the distribution of wealth and power in this great republic of
ours, remember, it was countless ordinary workers taking huge risks against
daunting odds that brought us to this moment.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Tonight, let`s declare that
in the wealthiest nation on earth, no one who works full time should have
to live in poverty. And raise the federal minimum wage to $9 an hour.

HAYES (voice-over): One year ago, in his State of the Union Address,
President Obama called on Congress to vote on a federal minimum wage
increase for the first time in seven years.

But Republicans were not going to let that happen.

SEN. MARCO RUBIO (R), FLORIDA: Raising the minimum wage does not grow the
middle class.

REP. PAUL RYAN (R), WISCONSIN: It actually is counterproductive in many
ways.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: You raise the price of
employment, you get less of it.

HAYES: So in the face of Republican obstruction, with no raise, minimum
wage workers took their fates into their own hands. It was just 15 months
ago that a few hundred brave people risked their livelihood, walking out of
their minimum wage jobs in New York City hoping someone would notice. Five
months later, the strikes doubled in size and we took notice.

TABITHA VERGES: I have to provide myself with food, clothes, a roof over
my head. I don`t have enough to even survive for the basic necessities in
my household.

HAYES: That was just the beginning. In July, over 2,000 people walked off
the job calling for higher wages. By August, the protest exploded in more
than 60 cities across the country.

PROTESTERS: Can`t take it no more!

HAYES: All of a sudden, the minimum wage was national news.

LESTER HOLT, NBC NEWS: In nearly 60 cities across the country, today, fast
food workers walked off the job.

UNIDENTIFIED FEMALE: Workers at fast food restaurants across the country
are walking off the job today.

UNIDENTIFIED MALE: Workers say they can`t afford to live on what they`re
getting paid.

REP. JOHN LEWIS (D), GEORGIA: Sometimes you have to use your marching feet
and sometimes you have to make a little noise.

HAYES: After their largest strike yet, one thing became clear. The fast
food giants had no interest in raising wages so organizers turned their
attention to the president.

REP. KEITH ELLISON (D), MINNESOTA: There are about 2 million workers who
work for federal contractors, $7.25, 14 grand a year, no benefits. An
executive order could solve this problem.

HAYES: Meanwhile, people kept on striking. In December, workers walked
out in some 100 cities. This past week, Pentagon fast food workers walked
off the job.

And tonight, a fast food worker and mother will be at the State of the
Union to hear the president announce that he will issue an executive order
to raise the minimum wage for federal contract workers.

For the thousands of workers who have organized and fought over the last
year, they have forced their voices to be heard.

(END VIDEOTAPE)

HAYES: Joining me now, Senator Sherrod Brown, Democrat from Ohio.

And, Senator, I feel like your voters, your constituents in Ohio are such a
kind of weather vane for the American populous. Your state has been very
hard hit by the loss of manufacturing. It sees the way the economy is
working, first hand.

What do you think the voters of Ohio are looking for in terms of the
performance of the economy and what the president says tonight?

SEN. SHERROD BROWN (D), OHIO: Well, I think the voters of Ohio understand
two things. They understand that the minimum wage, the value of the
minimum wage, purchasing power is a third less than it was in 1968. They
understand that minimum wage increases as the last one in 2007 are
bipartisan and I think they wonder why can`t we pass a minimum wage, why
can`t we work together on this, bring the minimum wage at least to $10.10
an hour. Raise the tip minimum wage from 20 years it`s been stuck at
$2.13, raise that to $7 an hour over the next couple, three years. It will
make a huge difference in people`s lives.

And Ohio voters understand one other thing. And that is that it`s good for
the economy. It puts money in people`s pockets. It helps small business.
It helps the economy grow.

HAYES: We`re looking at a live shot there, Senator, of Statutory Hall
right outside the capitol. The point you made there is an important one to
stress. The tipped minimum wage at been at $2.13, a testament to the power
of the restaurant lobby. I would add.

And speaking of lobbies and obstruction and opposition to the president,
the biggest thing I think between last year and this year`s State of the
Union are two breaking points -- the shutdown and disastrous political
consequences for the Republicans. And the nuclear option on presidential
nominees.

Do you think this White House has a different approach now to Republican
obstruction and the Republican House than it did a year ago?

BROWN: Well, I think the White House understands finally that if it`s got
Barack Obama`s name on it, the Republicans aren`t interested. Or they`re
interested in opposing it. It`s the same saw over and over again.

Something happened, Chris, 100 years ago, this month, Henry Ford announced
he was going to pay his workers $5 a day. Not because he was good hearted.
History doesn`t really say that about Henry Ford.

But he did it because he understood it was good for the economy. It would
help people grow -- it would help people basically buy his cars.

And the minimum wage plays the same role. Put money in the economy.
Republicans are starting to hear that from voters around Ohio. They`re
starting to hear from minimum wage workers. There`s a million people in
Ohio that make less than $10.10 an hour.

This is life changing for a number of them. It`s not good enough. It`s so
much better than what we have now. It`s time we do this bipartisanly like
we did six or seven years ago.

HAYES: And, finally, Senator, it feels to me sometimes like the president
is trying to turn a huge ship around, when you think about the trends of
inequality, the policies of inequality. The things happening to push us
toward this very unequal economy you have.

Do you think it`s hard to be able to go and tell voters we`re going to
change things when the distance between what you want and what ends up in
their paycheck is so far?

BROWN: Yes, I mean, so much of what the president`s tried to do has been
blocked just almost doesn`t matter what it is. As you point out,
appointments, minimum wage, extending unemployment benefits, immigration.
All the things that will help this economy grow. We haven`t been able to
do infrastructure, the kind of -- we haven`t invested this little in years
in our country. It`s time we do.

HAYES: Senator Sherrod Brown of Ohio -- always a pleasure. Thank you,
sir.

BROWN: Thank you.

HAYES: All right. Joining me now, Congresswoman Barbara Lee, Democrat
from California, cofounder and co-chair of the Congressional Out of Poverty
Caucus.

And, Congresswoman, there was a long time, particularly in the 1990s and
early 2000s, there was a vigorous debate inside the Democratic Party about
economic populism, about what kind of economic message Democrats needed to
pursue as a matter of policy and good politics.

Do you feel that your portion of the Democratic Party, your argument has
won?

REP. BARBARA LEE (D), CALIFORNIA: Well, I tell you, Chris, at this point,
it`s not about winning, but it`s about embracing the debate and
understanding that we need to move forward and address income inequality
and the reduction and the elimination of poverty.

I believe that our party, Democrats, really get it in terms of being on the
side of the American people -- when you look at the fact that we`re trying
to extend unemployment compensation, right now as we speak, for 1.4 million
people. Who`s trying to do that? It`s Democrats. We can`t get the
Republicans, especially here in the House, to support an extension of
unemployment compensation.

When you look at raising the minimum wage, for example, when you look at
every issue that Senator Brown talked about, the president has been
stopped, each and every step of the way.

So, I`m very pleased that the president is saying we can`t wait now. And
that he`s going to do everything he can do to take executive action to make
sure that the American people have a shot at the American dream.

HAYES: What do you say to those -- I`ve seen John Boehner, Republicans and
others crying about this being an imperial presidency, this ignoring of the
Constitution, pushing for executive orders. What`s your response to that?

LEE: My response is they`re just wrong. This is a democracy. When you go
back to when President Obama was elected, he tried every which way to get
the Republicans to support the Recovery Act. It ended up much too low for
many of us, $780 billion. We wanted over $1 trillion because we knew that
would happen.

But, of course, the White House, in the spirit of compromise, negotiated
with the Republicans. Not one Republican vote.

When you look at the Affordable Care Act, universal, affordable, accessible
care for every American, the president worked with Republicans. How many
votes did he get? Not one Republican vote.

So, it`s time to take executive action. The Democrats are fully in support
of that. I`m very proud of what the president is going to say tonight. We
need to address income inequality and we need to address it in a way that
reassures the American people that we`re on their side.

When you look at $7.25 an hour, how can anyone survive off of that?

When you look at the fact that the taxpayer subsidizes, mind you,
subsidizes big corporations to the tune of $243 billions and urges their
employees to apply for food stamps, Medicare, and section 8 -- come on,
Chris, it`s about time that stops.

HAYES: Congresswoman Barbara Lee, thank you for your time tonight.

LEE: Thank you.

HAYES: Joining me, Heather McGhee, soon to be president of the progressive
think tank, Demos.

Heather, congratulations on your new post.

HEATHER MCGHEE, DEMOS: Thank you.

HAYES: It`s wonderful news for the country, for the progressive movement.
We`re all very happy about this. The reason I wanted you on is to take a
victory lap because tonight, the president is going to sign an executive
order raising minimum wage for workers who are working for federal
contractors. And the idea for that started with this report by a little
think tank called Demos, which was titled, "Underwriting Bad Jobs: How Our
Tax Dollars Are Funding Low Wage Work and Fuelling an Equality."

This came from your shop.

MCGHEE: This research came from our shop. I have to say that their --
success has many mothers. The most important thing is actually what you
highlighted beautifully in your reel. The fact that people who are
actually, for whom a day`s pay means a lot, actually, stepped away from
that day`s pay to strike.

There`s been research about this issue for about a decade. (INAUDIBLE) has
done this as well as our friends at NELP because this seems like such a no-
brainer.

HAYES: Right.

MCGHEE: The American taxpayer, if you combine up all the different ways
that our federal dollars are touching these low wage service employees,
between grants and loans and all of that, is $2.2 million. That`s more
than McDonald`s and Walmart combined.

So, there was an idea object trying to push the research case for this and
say, you know what, we know that Congress isn`t going to do anything about
the minimum wage because it`s so captured, frankly, by the donor class and
the corporate lobby you talked about.

But the president is sort of the big boss, right? And he can do it. He
can be the responsible employer that he wants the whole country to be.

HAYES: The president will announce he`ll use executive authority to raise
the minimum wage to $10.10 for those working on new federal contracts for
services. I`m reading off a White House statement.

"Raising wages for those at the bottom will improve the quality and
efficiency of the services provided to the government."

This will not touch all 2 million. It`s unclear how far in terms of the
numbers of people we`re going to see. Do you think this also has cascade
effects in terms of the labor market more broadly or just the conversation
about the minimum wage?

MCGHEE: I think it`s a conversation not only about the minimum wage, but
about what`s wrong with our economy, right? If the president is able to
say that the problem with our economy is not in fact that there are too
many regulations or too low taxes on the wealthy, right, which is all we`re
hearing from the right, but saying, you know what, here`s what progressives
say, here`s what Democrats say, is that if you are a responsible employer,
this is what you do. It is better for productivity. It`s better for the
economy as a whole.

I think the president is going to be at Costco tomorrow. We do research at
Demos about the retail sector, which is one of those large, one of the
fastest growing sectors in the economy and one where it is proven that if
you have better paid workers, lower turnover, better customer service and
sales.

HAYES: You know, it`s fascinating because I think one of the other useful
things about this, it`s a proof of concept. And we`ve seen it local
municipal elections, state elections, raise minimum wage and actually, you
don`t see a massive hit to the employment levels.

And also there is something for the economists out there. It`s an
efficiency wage. There`s good evidence to suggest when you pay your
workers at the bottom of the wage scale more, you actually get a more
productive, longer lasting workforce less prone to turnover, less money
spent training.

Heather McGhee, the soon to be new president of Demos -- it`s always a
pleasure. Thanks for coming by.

MCGHEE: Thanks, Chris.

HAYES: All right. Coming up, our special ALL IN State of the Union
coverage continues. Do not go anywhere. We will have Rachel Maddow and
Chris Matthews. And the president`s speech is just around the corner.

Stick around.

(COMMERCIAL BREAK)

HAYES: One of the best memories I have from the past 10 years of covering
politics was being on the National Mall in 2009 the day before inauguration
with thousands of other people watching this.

(VIDEO CLIP PLAYS)

HAYES: Pete Seeger never refused to sing for anybody, the troubadour of
justice, father of American folk music. An icon died yesterday at the age
of 94. Rest in power, Pete Seeger.

(COMMERCIAL BREAK)

HAYES: With President Obama`s fifth State of the Union Address less than
one hour away, we expect President Obama to focus as we said on income
inequality, and an assertion whenever and wherever he can, he will take
executive action like raising the minimum rage for new federal contract
workers.

President Obama is expected to address immigration, private retirement
accounts and Iran. He`s also expected to talk about a controversial but
rapidly involving area of political progress, marijuana and its
legalization.

On the subject of marijuana use, the president recently told the "New
Yorkers`" David Remnick, quote, "I don`t think it`s more dangerous than
alcohol, less dangerous", he said, "in terms of its impact on individual
consumer. It`s not something I encourage. I told my daughters I think
it`s a bad idea, a waste of time, not very healthy."

The head of the Drug Enforcement Agency reportedly criticize those comments
in a close door conference with the group of sheriffs.

It`s going to be very interesting to see how President Obama will thread
the needle on this particular issue tonight.

Joining me is a man who knows a thing or two about threading the needle,
David Axelrod, MSNBC and NBC News senior political analyst. He`s also
director of the University of Chicago Institute of Politics, and former
senior adviser to President Obama.

David, I think this area of politics and policy is really fascinating
because we are seeing just an absolutely historic level of change in public
opinion. If you look at polling, support for legal marijuana now up to 55
percent. The only thing that is similar to this rapid change is marriage
equality.

What do you think the president is going to say tonight? What would you
advise him to say if you were still in that White House?

DAVID AXELROD, MSNBC SENIOR POLITICAL ANALYST: Well, I don`t -- I don`t
know that he should expand on what he said before if he addresses this in
his speech. I`m where you were at the beginning of, and for the first 15
minutes of your show. There is one overarching question facing this
country which is how in a rapidly changing economy where so many people are
being marginalized, do we restore a sense that if you work hard, you can
get ahead. If you work, you can earn a living wage.

This to me is what Americans are most interested in hearing. And this is
where he`ll spend, I suspect, most of his time.

HAYES: But part of the problem there, right, is that there are -- is that
there are relatively concerted bits of action he can take. The fed -- the
executive order on federal contractors being one of them. But he can`t
unilaterally pass a minimum wage bill.

And more broadly than that, the biggest problem with the American economy
right now in a cyclical sense is getting the full employment. And that`s
also something the president by himself doesn`t have the power to deliver
on. So, there`s a mismatch between what the problems the president can
identify and the solutions he can credibly promise and offer.

AXELROD: That is. That`s a great challenge. That`s a challenge of this
speech.

I think people are a bit jaundiced about the ability of Washington to get
things done. And so, what you don`t want to do is engage in a great kabuki
dance where you go on television and you suggest all these things that
everyone watching believes will not be accomplished.

So, I think you`ll see a mix of large proposals and things that he can do
on this own to advance the ball. But the main thing is, he will frame the
argument in the way I believe the American people are seeing it.

What`s interesting to me, Chris, is how much this argument has shifted
because now you see, even Republicans acknowledging that, yes, this is a
big challenge.

Now, their prescriptions are completely different. I don`t think they`re
particularly helpful. But the fact that Marco Rubio and Eric Cantor and
others are now talking about this as a central challenge tells you how much
public opinion is beginning to catch up with the politicians in Washington.

HAYES: We are awaiting the president leaving the White House for the
speech there on your screen. That`s where we expect to see him leave
momentarily.

"Washington Post" has a poll about which party is closer to your view on
the minimum wage: Democrats 49 percent, Republicans 35 percent. So, David,
I think you`re right on the minimum wage.

Do you think there is a danger in telling a story about income inequality
that ends up putting the blame on the American people for not getting
enough skills? I hear this sometimes from certain people around the
president. I`ve heard it from the president, himself, in which it sounds
like part of what he`s saying is, the American people need to get better
educated. I`m not sure that`s actually the full problem.

AXELROD: Well, it`s not the full problem. But it is an element of the
problem. There are millions of jobs that are available and others that are
emerging that require skills that people don`t have now. And if they had
them, they could fill those jobs, and so creating these synergies between
community colleges and businesses and so on.

Excuse me? I`m sorry.

Creating synergies between community colleges and businesses, creating
these high-tech corridors and so on. All of these things are useful in
terms of creating good, well paying middle class jobs. We have to reform
our job training system to make sure people have those skills.

HAYES: MSNBC senior political analyst, former White House adviser, David
Axelrod -- thanks for your time tonight, David.

All right. Coming up, our special ALL IN State of the Union coverage
continues. We have live pictures from the Capitol. We`re awaiting
President Obama`s big speech. And Rachel Maddow and Chris Matthews will be
here to preview it with us.

Stay with us.

(COMMERCIAL BREAK)

HAYES: The president is the only one delivering a speech tonight. There
will, of course, be an official response from the Republican Party.

Now, the opposition response is a relatively recent institution. The first
official televised response was delivered five days after President Lyndon
Johnson`s 1966 address. But in the era of Obama, official responding
hasn`t gone so well for the Republicans.

And this year, State of the Union responses have been multiplying faster
than we here at ALL IN can count them.

So, here with your definitive guide.

(BEGIN VIDEOTAEPE0

GOV. BOBBY JINDAL (R), LOUISIANA: Good evening, and happy Mardi Gras.

HAYES (voice-over): In recent years, the quickest way to go from rising
Republican star, to former rising Republican star, is to deliver the
response to the president`s annual address to Congress.

JINDAL: Americans can do anything.

HAYES: For Republicans looking to make their mark, the hope is the
American people will remember them for their ideas and rhetoric. But more
likely, they will be remembered for stagecraft.

SEN. MARCO RUBIO (R), FLORIDA: In the short time, I`ve been here in
Washington, nothing has frustrated me more than the false charges like the
one the president laid out tonight.

HAYES: Note to future responders, it is important to hydrate before giving
a televised response.

Also, important to look into the right camera.

REP. MICHELE BACHMANN (R), MINNESOTA: The Tea Party is a dynamic force for
good in our national conversation. And it`s an honor for me to speak with
you.

HAYES: Even if the response, itself, doesn`t kill one`s political
ambitions, it does serve as a reminder that the GOP sure does know how to
pick them.

THEN-GOV. BOB MCDONNELL (R), VIRGINIA: Good evening. I`m Bob McDonnell.

I come before you this evening as someone who has been falsely and
wrongfully accused.

HAYES: This year, the Republican Party will be offering four different
responses, at least.

First, there`s the official response. That honor goes to Congresswoman
Cathy McMorris Rodgers giving her party`s struggle with connecting to
female voters, it is important to note McMorris Rodgers is, in fact, female
-- the highest ranking Republican woman in the House.

Next, there`s the official response in Spanish. That will be delivered by
Congresswoman Ileana Ros-Lehtinen.

Then, there`s the Tea Party response. That will be given by Senator Mike
Lee, the (INAUDIBLE) to Ted Cruz`s Lassie (ph).

UNIDENTIFIED FEMALE: Don`t you question my motives.

HAYES: New this year, the response from Rand Paul of the Rand Paul party.
Mr. Paul will be offering his own freelance video message to be posted on
YouTube, Twitter, Facebook and Snapchat.

But if you aren`t satisfied with the official response, la respuesta
oficial en Espanol, the Tea Party response, or the Rand Paul response --
fear not. The GOP will have rapid response booths set up just outside the
House chamber where any and all Republican lawmakers can give their own
personalized response to the president`s address through six-second Vine
videos.

You get a response. You get a response. You get a response. Everybody
gets a response.

This messaging free for all is kind of like "Time" magazine honoring you as
the person of the year. If you are giving the response to the State of the
Union, then -- well, no one is giving the response to the State of the
Union.

(END VIDEO CLIP)

HAYES: Coming up, our special ALL IN STATE OF THE UNION coverage continues
with Rachel Maddow, Chris Matthews, and the president`s speech is just
minutes away. Stay right there.

(COMMERCIAL BREAK)

HAYES: You`re looking at a live picture of the back door to the south lawn
where the president will momentarily be departing to make his way down
Pennsylvania Avenue to the capitol. This hour, the House Chamber is coming
alive as members of all three branches of government begin filing in for
President Obama`s fifth state of the union address.

Joining me to talk about what we can expect tonight, Robert Reich, former
secretary of labor in the Clinton administration. He`s the author of
"Aftershock: The Next Economy In America`s Future." The documentary
"Inequality" for all is available on iTunes.

Robert, I was talking to Sherrod Brown, Barbara Lee and David Axelrod at
the top of the show. I feel like there`s a huge debate in the Democratic
Party about progressive populism, about a more pro-worker, pro-labor agenda
combatting inequality head on. Sometimes I feel like that`s where the
president is and then I hear David Axelrod talking about job training and
skills mismatch. And I throw up my hands and feel like we`re back in the
1990s all over again.

ROBERT REICH, FORMER SECRETARY OF LABOR CLINTON ADMINISTRATION: Well,
there is a tension there, Chris. I mean, obviously you`ve got some
Democrats that only want to talk about education, but obviously it`s much
larger than that. We`re talking -- and they -- Democrats really do need to
talk about the undermining of our democracy. When you got so much money at
the top, inevitably, you`ve got a democracy that is going to be responsive
to that money rather than responsive to average working people.

HAYES: Well, here`s the perfect example of that. There was all this talk
in the run-up to the speech about inequality was going to be a theme of the
speech. I saw one article about how all these angry CEO`s (inaudible) and
their various emissaries were calling the White House to express their
anger with the idea that inequality was going to be the topic. Then I saw
more articles saying, well, we are going to talk more about opportunity. I
was like there`s the problem in the nutshell, isn`t it?

REICH: Well, it is a problem. I think the framing of an issue as
inequality is extremely important. The president has done this before. He
said inequality was the defining challenge of our time. It is the defining
challenge of our time because there`s no way we can have equal opportunity.
There`s no way the middle class and the people aspiring to join the middle
class can get ahead when almost all of the economic gains are going to a
small group at the top. That`s a political dead end for the rest of the
country. That`s also an economic dead end.

HAYES: Here`s what I want to hear even more than inequality. Believe me I
wrote a whole book about inequality as did you. I`m with you 100 percent.
I want to hear full employment. Everyone who wants to work in this country
should have a job. There right now, you see I believe the president`s
entourage beginning to file out as he gets in the car. Everyone who wants
to work in this country who is capable of working should have a job. Full
employment was in the Democratic Party platform from 1944 to 1988. It has
not appeared since according to the great Jonathan Cone.

REICH: Chris, it ought to be there, but it`s not just full employment. We
can have full employment at lousy jobs. That`s what we`re getting.

HAYES: Right. Good point.

REICH: The median wage keeps going down. There has got to be full
employment at good jobs. We have to have shared prosperity in the country.
That`s the critical issue.

HAYES: Is there a way to do that doesn`t end up threatening some very
powerful people? I mean, it seems to me the line you have to walk if
you`re the president is trying to sell this politically. You go toward --
there`s the president and the first lady as they come out of the south lawn
of the White House to get into the motorcade to proceed to the capitol, to
deliver the fifth state of the union.

And as the president gets in the car there, and they make the last-minute
changes to the speech, Robert, there`s this fine line that the president
ends up walking in which you don`t want to offend the very same powerful
interests who benefit the most from this economic order at the same time
you want to associate yourself with good policy that is popular, like
raising the minimum wage.

But ultimately like I said to Sherrod Brown, there`s a gap between what you
can say and which problems you can identify and what solutions you can
deliver.

REICH: Well, the fact of the matter, Chris, the wealthy in this country
would do better with a smaller share of a rapidly growing economy than
they`re doing right now with a big share of an economy that`s almost dead
in the water because there`s not enough shared prosperity to give the
middle class the purchasing power to keep the economy going.

HAYES: I agree. But can you convince those people that`s true because I
don`t think they believe it? They really don`t.

REICH: They`re beginning to. They`re beginning to. I mean, you hear not
only Warren Buffett and Bill Gates Sr., you hear Bill Gross, head of PIMCO,
the giant bond trading firm. All these people are starting to look at the
economy and say, wait a minute, there`s something fundamentally wrong here.
We`re not going to make money if the vast American middle class and the
poor don`t have money in their pockets. The customers are driving the
economy or should be driving the economy. They are the job creators. It`s
dawning on them.

HAYES: Slowly but surely it`s dawning on them. Look at some of the
earnings analysis for firms like Wal-mart which say, look, if people don`t
have money to spend, the stock price of your enterprise is in trouble.
Former Secretary of Labor Robert Reich, always a pleasure. Thank you.

REICH: Thanks, Chris.

HAYES: Up next, Rachel Maddow and Chris Matthews will be here with me as
the president makes his way down Pennsylvania Avenue to deliver the state
of the union speech. That is just minutes away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: There are also
those who claim that our reform efforts would ensure illegal immigrants.
This, too, is false. The reforms, the reforms I`m proposing would not
apply to those who are here illegally.

UNIDENTIFIED MALE: You lie!

(END VIDEO CLIP)

HAYES: One of the most memorable moments of the Obama era from the
president`s September 2009 address to the joint session of Congress. After
seeing there on your screen is the Senate entering the House chamber to
seat themselves for the state of the union. At this moment, the president
and first lady are making their way, the very short distance down
Pennsylvania Avenue from the White House to Capitol Hill. There`s the vice
president, of course, as he enters the chamber. He will be sitting behind
the president next to the Speaker of the House John Boehner in their
ceremonial roles.

That clip we played, of course, was Republican Congressman Joe Wilson of
South Carolina shouting "you lie" over the president`s remarks. A reminder
of the kind of obstruction this president has faced for the duration of his
term in office.

Joining me now, my MSNBC colleagues, Rachel Maddow, host of the "Rachel
Maddow Show" and Chris Matthews, host of "Hardball." Chris and Rachel,
lest anyone think the Joe Wilson thing is all gone, let me read you a tweet
from Texas Congressman Randy Weber, on the floor of the House waiting for
the socialistic dictator who has been feeding us a line. I don`t know what
that means but gives you a sense of what the flavor of the obstruction
still is five years into the presidency.

RACHEL MADDOW, HOST, MSNBC`S "THE RACHEL MADDOW SHOW": Have we confirmed
that`s an actual member of Congress and not a fake Twitter feed while
they`re trying to troll us into condemning them, while it`s somebody who`s
been made up?

HAYES: I am glad you asked that. I had an identical thought and then I
double checked. It`s a verified account and yes, Randy Weber is exactly
the congressman from the 14th district of Texas because I totally thought
the same thing, but, of course, it is impossible to tell the difference
between parody and actual GOP members of Congress often.

MADDOW: Let`s make sure we give him the benefit of the doubt and assume
he`s been hacked by somebody who crawled out of the comment section on
YouTube and assume that isn`t somebody who`s actually going to be in the
chamber tonight. It`s amazing.

CHRIS MATTHEWS, HOST, MSNBC`S "HARDBALL": The very idea they would do
this, in what is a historic occasion, just tells you that there are no
rules.

HAYES: Yes.

MATTHEWS: And, Chris, the bad performance, bad manners, lack of dignity,
all those things is off the board in this sort of right wing sort of
revolutionary thinking that anything goes. We`re throwing stones at the
window of the American republic. That`s fine because somehow we`re so
angry that anything goes.

And, unfortunately, I think it does pretty much prove that these guys can`t
be beaten in the primaries. There is no outer limit. There`s no boundary
that says, no, don`t go further than this. I had a guy on the other night,
I said, the standard question, which he called me taking him down the
rabbit hole. I did my sort of mental check. I said, was President Obama
legitimately elected president? He said I`m not going down that rabbit
hole. I knew you`d do that.

HAYES: Classic rabbit hole, Chris.

MATTHEWS: Is this president the president of the United States? That is
considered a trick question.

HAYES: Well, I think, Chris, it speaks to an evolution, one of the kind of
plot lines that`s unfolding in the president`s in the White House telling
us there`s going to be a focus on executive action. The idea of
recognizing the opposition to what it is, Rachel. Two big things have
happened in that relationship. One, the shutdown and catastrophic
political consequences for the GOP when the president held firm and stared
them down, two, the filibuster, which was supposed to be the end of the
republic and led to a bunch of people getting nominated to fill vacancies.

MADDOW: That is the idea we have to worry about partisanship becoming too
terrible to survive if we do something like reform the filibuster. It`s
sort of like turning the telescope around the other way, right? You know,
like, actually people screaming "you lie" at the Ft president when he`s
doing a joint address to Congress, that`s a more partisan thing than the
Senate acting on nominations.

The point you were making and Chris Matthews you were just making, after
Joe Wilson did that in September 2009, part of the reason I think we knew
we were in for something different with the way this president was treated
was we saw it happen again at the next state of the union in 2010 when a
conservative Supreme Court Justice Samuel Alito also mouthed the words.
Ted Nugent was brought as a congressional guest last year.

This year, it`s a member of the "Duck Dynasty" clan. There`s a prop thing
going on that involves no respect for the president. That isn`t policed
anywhere within the right wing and that is a different cultural feeling
that we`re having about the presidency and about moments of what are
usually gravitas like tonight.

MATTHEWS: I think that this is really a statement of social reality, not
just individual quirkiness. It would be one thing if Joe Wilson said I`m
going to upset the evening, but he did it. He knew he`d be cheered; there
are would be people in the room that would be receptive to it. A whole
political movement was receptive to. He goes wherever he goes and gets
applauded for that, I`m sure.

HAYES: Let me break in real quick.

MATTHEWS: Part of his rap sheet.

HAYES: Let me break in quickly, Chris, just to tell folks what they`re
seeing as people enter the chamber on your screen, Senator Bernie of
Vermont, Marco Rubio, Debbie Wasserman-Schultz of Florida, also head of the
DNC. We saw Kelly Ayotte of New Hampshire. Behind her before we had Ted
Cruz. There`s Senator Ed Markey of Massachusetts, newly elected to fill
the seat of John Kerry`s who, of course, departed for the State Department,
behind him, Richard Blumenthal of Connecticut.

Do you think, though, Chris, getting back to the Joe Wilson point, this
gets down to the nub of the issue, right? We think about what the
president`s agenda has to be tonight. And the implacable fact of the
matter, who matter what he says and the agenda items he`s discussing are
polling, he will see nothing from the House Republican caucus that will
come to meet him halfway that in some ways part of it has to do with the
structures in place.

The fact they will be celebrated by a movement that is committed to
destroying and on instructing the president. Part of it has to do with for
the most part a lot of the folks are true believers. When Joe Wilson said,
for instance, said "you lie" he really thought the president was lying.
When people get up tonight to give the GOP responses and talk about
socialism and the like, they genuinely believe and the people that vote
them in office and donate money to them genuinely believe he`s ushering in
an era of socialism.

MATTHEWS: That`s a question, you know, it`s beyond me. I always wonder,
with any politician, you know, any politician, how much of it would pass
their own but them in a box, how many of them are saying they know are
appealing to their base when they`re much more complicated people than
that? I generally assume most politicians, with some exception like Louie
Gohmert, are more complex than the cartoon characters that they talk like.

But, you know, in politics today, more than ever, you have to buy the blue
plate special. You can`t order off the menu. Can`t say, you know, I`m on
a more conservative on that issue of abortion than some people are. I`ll
stake with Roe V. Wade. I don`t like late-term abortion. Even to say
something like that is to go; they`re a little different on that. They`re
not clearly pro-choice or nobody wants to talk like that.

It`s much better to just say, I`m 100 percent ADA or 100 percent ACU and
keep it simple because that is the pattern of American politics! No
exceptions. No ordering I`d rather have actually I`d rather have coleslaw
than French fries. I think it`s better for me. Nobody does that.

HAYES: In case anybody is wondering who the gentleman is in the beard,
that`s a star of "Duck Dynasty" aforementioned by Rachel Maddow.

MADDOW: Everything that happens related to "Duck Dynasty."

MATTHEWS: Sean Hannity.

MADDOW: Mr. Hannity says he`s going to leave Fox News and run for office
in Texas. That`s why Louie Gohmert is bringing him Texas or Florida he
says.

HAYES: The Texas congressional caucus is really quite an amazing gallery
of folks. We just saw John Cornyn earlier who`s facing a primary challenge
from another member of his own caucus, Steve Stockman in the House. That`s
Ted Cruz, of course, probably the most famous member of the Texas
congressional delegation, as he approaches.

Rachel, what do you think tonight the other big thing when I think about
the difference between the last state of the union and this one is in the
last state of the union Obamacare and its implementation was a distraction,
it was still in the future. Now it`s reality. What do you expect to hear
the president say and talk about in relation to the ACA, the affordable
care about, tonight?

MADDOW: I think the president telegraphed what he`d say about the ACA in
the way he`s been talking about it publicly over the last few months, which
is not just touting the website is working better or the enrollment numbers
are up but when you look at it through the perspective of individual
Americans getting coverage you couldn`t get before, look at it from the
perspective of individual people who were essentially boxed out of coverage
by the old insurance ways of doing business that are now precluded by the
ACA.

He`s going to tell stories that make you feel good about what the policy is
aiming toward. I don`t think he will brag about its success, though with 3
million people signed up, certainly the numbers are going his direction.
He`s going to sell it in terms of why it`s a good thing to aim at.

Interestingly, I think you`ll see from Cathy McMorris Rodgers a softening
on the Republican objections to the ACA in a sense she`s going to say we
don`t want to go back to the way things were. That`s going to be a
remarkable step forward for the republicans tonight if in fact she delivers
that line.

HAYES: What is fascinating about that, particularly, this week the big
headline in the conservative media, which briefly was there Cory Booker, a
new member of the Senate? He was elected from New Jersey just recently.
Of course, Lindsey Graham from South Carolina! He`s facing a tough re-
election battle this year. He`s got several primary challengers to his
right. He will also probably have a relatively formidable obstacle in the
general election, though that remains to be determined.

Rachel, in terms of the Affordable Care Act, the big news in the
conservative media this week was, of course, the Republicans have their
Obamacare alternative. I just couldn`t I was shaking my head all week as I
saw this. All this very serious coverage from the conservative media and
Fox News, well, ladies and gentlemen, here it is, here`s the plan for the
affordable care act alternative. It`s 2014.

This is like me running in, stop the presses. I know the way out of the
Cuban missile crisis. I`ve got it solved. Turn the ships back. It is
late for the Republican alternative to the Affordable Care Act.

MADDOW: Although, it seems notable from a metaperspective that they`ve
decided that maybe health reform that health care needs to be reformed.
Granted what they`re proposing is t.o.r.t. reform and portable health
insurance dollars George W. Bush tried to move on, too. It`s not a
comprehensive idea about how to get people covered.

But it`s at least an acknowledgment we can`t go back, Republicans admit
what we had needed fixing. That`s a paradigm shift. Sort of once they`ve
shifted to that, I sort of feel like the Democrats win because people trust
Democrats to be able to reform a system.

HAYES: Do you agree with that, Chris?

MATTHEWS: It`s the coverage they`re interested in, you know?

HAYES: Do you think that marks sort of, as Rachel is saying, kind of the
gate closing behind finally this? Once the Republicans are out with their
version of whatever they want some form of quasi universal coverage to be
that we have actually finally reached some point in which we evolve to the
point where there`s consensus on that main goal.

MATTHEWS: Well, they never called it health care reform. What they`d
always say is we need t.o.r.t. reform, caps on settlements.

HAYES: Right.

MATTHEWS: They always said we`ll help beat the problem somehow. They
never say they`re going to deal with the problem of the emergency room
where people are relying on nothing really as an alternative and never said
we`re going to deal with the tens of millions, 41 million people uninsured.
They`ve never done it like that.

I was reading the other day, Winston Churchill, great conservative hero of
the western world for the 20th Century and this century was for health care
reform all his life from the time he was a liberal. All the way through
these conservative days! It`s not something weird to be for health care.

HAYES: Yes.

MATTHEWS: For a conservative.

HAYES: Particularly in the western Democratic world, conservative parties
on the whole buy into the notion of universal coverage. The American right
has been historic outlier. That`s Tim Kaine on your screen. He`s a
senator from the great state of Virginia. Former governor, former head of
the DNC, now a senator from Virginia shaking hands with Mitch McConnell, as
John Boehner gavels the House to order. The president is in the holding
room at this moment. Let`s take a listen to Speaker Boehner.

CONGRESSMAN JOHN BOEHNER (R), HOUSE SPEAKER: The gentleman from Virginia,
Mr. Cantor! Gentleman from California, Mr. McCarthy! Gentleman from
Oregon, Mr. Walden! The gentleman from Oklahoma, Mr. Langford! The gentle
woman from Kansas, Miss Jenkins! Gentlewoman from North Carolina, Miss
Fox! Gentlewoman from California, Miss Pelosi! Gentleman from South
Carolina, Mr. Clyburn! The gentleman from California, Mr. Becerra!

HAYES: Speaker Boehner announcing the escort committee. That is the
members of Congress who have been selected to be in the ceremonial
training, if it were, in front of the president as he enters the chamber.
Of course, there`s tremendous competition for that august designation.

And that`s now the vice president of the United States, Joe Biden who will
be sitting in that chair in his role as the presiding officer over the
United States Senate. He is announcing the Senate Entrance Committee also
sought after positions because this is camera time for the folks at home
for anyone, particularly in a tight re-election race, or who wants the
folks at home to know they are a big shot in Washington, D.C. and who does
not want that?

VICE PRESIDENT JOE BIDEN: Senator from South Dakota, Mr. Thune! The
senator from Missouri, Mr. Blunt! The senator from Wyoming, Mr. Barraso.

BOEHNER: Members of the escort committee will exit through the chamber
doors.

HAYES: Here they go to go get the president to bring him back into the
chamber. While we wait for that, Chris, the underlying public opinion fact
going into this speech, and going into this year of this presidency, I
think is this number, 63 percent believe the nation is heading off the
wrong track and 28 percent believe the country is heading in the right
direction.

That seems to me the major obstacle this president has faced from the day
he took over this cratering economy and faces until this moment is that
people fundamentally still feel pessimistic about the direction the
country`s headed in. Chris, what do you think of the right track/wrong
track numbers, what they mean for the president?

MATTHEWS: I think they`re stuck. In fact, they`re getting worse. They
don`t quite square with the economic health of the country. That`s the
problem. The economic health is picking up. It`s perking up a bit. This
year looks to be better than last year. As the president will say tonight,
it`s his best, the year we`re in, the year we`ve gotten through. Yet, the
market, the stock market juggles around. It`s going consistently up but it
has had its falls as it has the last couple weeks.

Of course, we have big unemployment numbers coming in. Every week we get
these big numbers on what we estimate it`s going to be. You know the
number of people who have declared for unemployment. These numbers are
very erratic. Sometimes we get like a 7 0 when we thought we were going to
get a 200 and we just have no confidence of the trend I guess it is.

HAYES: Of course, that is second lady, Jill Biden entering the chamber
right now. She will be sitting in the gallery and now we begin the
ceremonial procession into the chamber. Rachel, we`ve set into this kind
of equilibrium, as we hear the applause. The people assembled are
applauding.

We`re not yet at the moment when the big sort of ceremonial announcement
will come, although that will be momentarily. We seem, Rachel, to have
settled into a kind of equilibrium that a lot of Americans find frustrating
which is basically we`re growing but not enough.

MADDOW: Well, yes, but in the big picture, things we`re seeing the kinds
of numbers that would usually redound to the popularity of the president.

HAYES: That`s right.

MADDOW: We`ve got unemployment at the lowest rate it has been since he was
elected president, yet alone sworn in. We`ve got the stock market went up
28 percent last year, 28 percent. That`s crazy. Corporate profits are
doing spectacularly.

HAYES: Right.

MADDOW: I mean, it`s true, median income and wages are stagnant. That is
why public that`s why economic inequality is going to be the focus of
tonight`s speech. In Meta terms, he ought to be more likes than he is.

HAYES: That`s right. The connection from the numbers you just said and
the numbers of approval and right track/wrong track, the bridge between
point "a" and point "b" is precisely this question of inequality.

All right, I`ll see you both again in a few minutes as our coverage
continues. For now, Rachel Maddow, host of "The Rachel Maddow Show" and
Chris Matthews, host of "Hardball," thanks for pre-graming with me.

MADDOW: Good evening. I`m Rachel Maddow alongside Chris Matthews here in
New York City. It is state of the union night. No matter who is
president, no matter the exact political circumstances in the country at
the time of the state of the union! This is a night that is always
political Christmas. As you see the Supreme Court justices filing in
there!

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

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