updated 8/6/2014 3:27:45 PM ET 2014-08-06T19:27:45

THE LAST WORD WITH LAWRENCE O`DONNELL
August 5, 2014

Guest: Ryan Retundo, Tim Harris, Richard Wolffe, Josh Barro, Dana Milbank,
Matt Zapotosky

STEVE KORNACKI, MSNBC HOST: Anyway, that does it for us tonight. We will
see you again tomorrow. Now it`s time for "THE LAST WORD WITH LAWRENCE
O`DONNELL."

Lawrence, good evening.

LAWRENCE O`DONNELL, MSNBC HOST: Steve, you know, what`s your favorite
flavor of ice cream is a much tougher question than you might think. For
those of you who are not addicted to ice cream, it can be a very difficult
question.

KORNACKI: Yes. I must tell you, I -- if you have a 16-year-old who beats
the 5-year-old, are you really proud of that?

(LAUGHTER)

O`DONNELL: Yes. Winning`s winning, Steve. Come on.

KORNACKI: Yes. That`s a point (INAUDIBLE), Lawrence.

O`DONNELL: Thanks a lot, Stephen.

KORNACKI: All right.

O`DONNELL: Rand Paul is in Iowa where he is running and running and
sometimes ducking.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What caused him to make a quick exit?

UNIDENTIFIED MALE: Smack in the middle of Senator Rand Paul`s three-day
Iowa tour.

UNIDENTIFIED MALE: Obviously, jogging for a job for president of the
United States.

ALEX WAGNER, MSNBC ANCHOR, NOW: Paul has been espousing a message of
inclusion.

SEN. RAND PAUL (R), KENTUCKY: We have to go after people who haven`t been
considering the Republican Party.

UNIDENTIFIED MALE: You favor the Iowa Congressman Steve King.

REP. STEVE KING (R), IOWA: I`m not sure Barack Obama can pass the
citizenship test.

UNIDENTIFIED FEMALE: How smart is it for him to be hanging out with folks
like Steve King?

CHRIS MATTHEWS, MSNBC ANCHOR, HARDBALL: Steve King of Iowa has taken
control of the GOP clown car.

JOE SCARBOROUGH, MSNBC ANCHOR, MORNING JOE: And then there`s this awkward
when Paul and King were approached --

MATTHEWS: Confronted by two Hispanic activists.

UNIDENTIFIED MALE: And what does Rand Paul do?

WAGNER: Drop your hamburger and run. The new Etch-a-Sketch. Aligning
yourself with extremists, Paul got the heck out of there. Then trying to
run away from them before anyone notices.

REV. AL SHARPTON, MSNBC ANCHOR, POLITICSNATION: He didn`t want to leave
without his drink.

WAGNER: He did not drop his hamburger when Benghazi was mentioned.

PAUL: Hillary Clinton made a host of errors being there.

UNIDENTIFIED FEMALE: If he`s trying to go (INAUDIBLE) Hillary Clinton.

PAUL: Not protecting our embassy.

UNIDENTIFIED FEMALE: And he has to start by not running away from
teenagers.

WAGNER: You can`t have your hamburger and eat it, too.

(END VIDEO CLIP)

O`DONNELL: We`re getting a preview of what Senator Rand Paul will sound
like when he is an official 2016 presidential candidate.

Rand Paul is currently in Iowa on a three-day, eight-city tour. Today, he
went after the likely 2016 Democratic nominee.

(BEGIN VIDEO CLIP)

PAUL: There`s two dozen jihadists, some of them fighting in Syria, some of
them are fighting in Iraq. They`ve now got a place to organize, it`s
Libya after the bombing. Our embassy just finally fled. Hillary Clinton
made a host of errors being there, not protecting our embassy, and I think
precludes herself from ever being commander-in-chief.

(APPLAUSE)

Hillary`s war in Libya, or Hillary`s war in Syria, none of this was ever
approved by Congress. The president did it unilaterally. And in doing so
the unintended consequences are, there are more jihadists running amuck in
Libya, our embassy is done in Libya, and there are 15,000 MANPADS missing.

(END VIDEO CLIP)

O`DONNELL: But Rand Paul started talking about Hillary and Benghazi in a
speech last night.

(BEGIN VIDEO CLIP)

PAUL: You know what? By not reading the cables, by not providing
security, I think you`ve precluded yourself from ever being considered as
commander-in-chief.

(END VIDEO CLIP)

O`DONNELL: One issue Rand Paul doesn`t seem to want to talk about on that
campaign trail is immigration. Last night in Iowa, two young people
approached Congressman Steve King about his support for legislation ending
the Deferred Action for Childhood Arrivals Program, which passed in the
House last Friday. Here`s how Rand Paul responded.

(BEGIN VIDEO CLIP)

ERIKA ANDIOLA, ILLEGAL IMMIGRATION ADVOCATE: Hi. My name is Erika. How
are you?

(CROSSTALK)

ANDIOLA: I`m actually a DREAMer myself. And I`m from, originally, from
Mexico. But I`ve been raised here. I graduated from Arizona State
University.

KING: Which university?

ANDIOLA: Arizona State University. And I know you want to get rid of
DACAs, I want to give you the opportunity if you really want to get rid of
it, just rip mine. You can go ahead and do that. You take my DACA you`re
going to take really everything that right now I`ve accomplished.

KING: Wait a minute. This is not what I do.

ANDIOLA: I just don`t understand why you`ve been wanting to do that. And
for you to be fighting so much for DREAMers.

(CROSSTALK)

KING: This is not what I do. This is not what I do.

ANDIOLA: Calling us names, saying that we have calves like cantaloupes.

KING: I don`t call you names. I say -- no, no. That`s drug smugglers.

ANDIOLA: I just don`t understand.

KING: Please. Please. You`re very good -- stop a minute. Stop a minute.
You`re very good at English, you know what I`m saying.

ANDIOLA: I was raised in the United States.

KING: Right, so you can understand the English language so don`t
(INAUDIBLE).

ANDIOLA: I`m not acting like I don`t understand.

KING: No, you are because --

ANDIOLA: I`m trying to figure out where you`re coming from.

KING: No, you are because you`re saying something that`s not true.

ANDIOLA: OK. What is not true?

KING: As I just said, I spoke of drug smugglers. Now you`re not here to
tell me you`re one of them, are you?

ANDIOLA: Do I look like a drug smuggler to you?

(END VIDEO CLIP)

O`DONNELL: Joining me now is Richard Wolffe, executive editor of MSNBC.com
and MSNBC political analyst Josh Barro, correspondent for "The New York
Times," and an MSNBC contributor.

Richard, so much to discuss in what we just saw. Let`s start with
Hillary`s war in Libya and Hillary`s war in Syria, which is Rand Paul --

(CROSSTALK)

O`DONNELL: Yes, tell us what`s news there?

RICHARD WOLFFE, MSNBC.COM EXECUTIVE EDITOR: Well, for someone who likes to
see a nominal, unannounced opponent is always precluded from being
commander-in-chief, you`ve got to wonder about his own preclusions because
there is no American war in Syria. There actually was no combat engagement
in Libya. There was some support going on. But the idea that getting that
fact wrong and then saying that it was a unilateral war is so mind
bogglingly wrong, I think even the voters in rural Iowa, and I spent a lot
of time with voters in rural Iowa.

They are much better informed about what`s going on around the world than
what you just heard from someone who`s clearly running for president.

O`DONNELL: And Josh, I have to suspect that we`re going to be hearing
about Hillary`s health care plan.

JOSH BARRO, NEW YORK TIMES: Right.

O`DONNELL: That every single thing in the Obama administration that Rand
Paul will object to when he`s running for president will suddenly become
Hillary`s instead of President Obama`s.

BARRO: Well, except that she`s the Democratic opponent, which I expect she
will be. And I think this is interesting for Rand Paul because Rand Paul
has a much less interventionist view on foreign policy than a lot of people
in the Republican Party.

O`DONNELL: Yes.

BARRO: This is a way for him to maintain that view while relating to
Republicans, say, well, this war, this was the Democrats` war so you`re
with me against this war. He`s going to have some difficulty with
opponents on his right saying that he`s not strong enough on foreign
policy, not wanting to intervene in places where some conservatives do.
And I think this is a way for him to sell that message to the base.

O`DONNELL: And the Benghazi message might be running out of steam.
There`s a report in the "San Francisco Chronicle" saying that the House
Intelligence Committee led by Republicans has concluded that there was no
deliberate wrongdoing by the Obama administration on the 2012 attack on the
U.S. consulate in Benghazi, Libya, that killed Ambassador Chris Stevens and
three other Americans.

This is according to Congressman Mike Thompson, the second ranking Democrat
on that committee. Thompson said the report confirms that no one was
deliberately misled, no military assets were withheld and no stand-down
order to U.S. forces was given.

Richard Wolffe, assuming that report comes out and that report supports
what the Democratic congressman says it does, is it possible -- and as I
field the question being formed, is it possible then that Republicans like
Rand Paul will stop talking about Benghazi?

WOLFFE: You`re such an optimist.

(LAUGHTER)

WOLFFE: I have to say that, even if the House Republican-led committee
said that there was no deliberate wrongdoing, that no one was deliberately
mislead, there has been deliberate misleading of the American people. And
it`s by conservatives like Rand Paul. Because you can understand why a
conservative voter in Iowa would believe this stuff. It has been repeated
so many times that there was some cover-up. There was wrongdoing.

It was something intentional. There were these orders that were pulled
back. You`ve got to believe because it`s been repeated so many times, but
who would believe the findings of the (INAUDIBLE) House committee even if
it`s led by Republicans when it has been repeated so many times? If you
were running for president, you would say it, too, because no one is going
to dispute it. Not in the Republican field.

O`DONNELL: Now let`s get to the -- when we`re discussing this, it would be
nice if we could get that video up again of Rand Paul trying to have lunch
and then making a decision that lunch is going to be over sooner than we
think because those young DREAMers approached, identify themselves, extend
their hands, shake hands with Congressman Steve King.

Rand Paul, he hears it, as well as we just did, even better because he`s
sitting right there. He`s heard them identify themselves and knows what
they are and he makes the right political move for a Republican candidate
in Iowa. Just get out of there. This can come to no good.

BARRO: Yes. I mean, this is such an awkward political issue for
Republicans. There are so much of the Republican base which is just
strongly very anti-immigration. The only thing House Republicans could
agree on as an immigration package was a will to end DACA and say no, we
want to -- we don`t want to let these people stay in the country. At the
same time, broad comprehensive immigration reform polls well with the
electorate as a whole.

And when Republicans talk about these immigration issues, they often come
off as -- come off as sort of nasty. I mean, you have Steve King right
there with his calves the size of cantaloupes line and he`s saying, oh no,
I didn`t mean you, I meant the other people. But so -- and also you have
elites in the Republican Party who were quite favorable to immigration. So
the right strategy for anyone running for president is to say as little
about immigration as possible and certainly not be present for an argument
between Steve King, whose supporters you want to back you in the Iowa
caucus, and apparently sympathetic immigrant who just wants to make a
living in the United States.

O`DONNELL: And Richard, a classic political move. I don`t know if the guy
in the green shirt is a Rand Paul political handler, but you know, you get
the guy out of there as soon as you start to hear those kinds of things.

WOLFFE: Yes. And the official story is of course he had a very urgent
press briefing he had to attend.

O`DONNELL: Of course he had.

WOLFFE: Which is what that nod of the head was. Truth is, the glory of
Iowa and New Hampshire and all these early states is that you cannot run
away. He may be able to duck out of it this time, but there will be a town
hall, there will be another DREAMer and there will be more video cameras on
him, and he won`t be able to take half of that burger and whatever is in
that cup and run away. Because he has to answer questions.

O`DONNELL: Let`s listen to Rand Paul talking about something that no other
Republican talks about, and that is expanding their base. Let`s listen to
this.

(BEGIN VIDEO CLIP)

PAUL: To get more people to come to the party -- this may not apply to
Iowa so much. But if you want to win Illinois, Ohio, Michigan,
Pennsylvania, we win 80 percent of the geography and we lose all the big
cities primarily because we don`t get African-American vote. We have to go
after people who haven`t been considering the Republican Party. Frankly, I
think some of our laws have disproportionately affected people who live in
cities. Disproportionately affected African-Americans, Hispanics.

(END VIDEO CLIP)

O`DONNELL: Josh, a message never before heard by a Republican presidential
primary voters.

BARRO: Yes. And it`s interesting because this is a trend that started at
the state level with Republicans. You`ve had a lot of Republican governors
especially in the south doing sentencing reform saying we`re imprisoning
too many people. It has big negative effects on black communities and also
costs a lot of money to the economy and to the government and that`s
trickled up to Congress. And Rand Paul is doing something quite serious on
it with Corey Booker.

I think the challenge with this message, though, is it`s not just a single
issue one which Republicans can change their position and repair their
reputation with African-American voters. You`ve seen this little voter
I.D. where Rand Paul sort of danced back and forth on the issue on whether
he would push back on the Republican Party. This is an issue that really
hurts Republicans with black Americans because they see it as an effort to
keep them from voting. But when you talk to Republican base voters, they
genuinely believe there`s a ton of voter fraud that needs to be combated.

O`DONNELL: Richard Wolffe and Josh Barro, thank you both for joining me
tonight.

Coming up, soap opera details in the trial of disgraced Virginia governor
Bob McDonnell. You`ve got to hear this defense to believe it actually --
if you hear this defense, believing it is not going to be very easy.

And a report claims that people living in the crossfire in Chicago are
having some of the same emotional symptoms as combat veterans.

And if you had a little more money, would you spend it on things you need
or save it? The answer to that question and what the rich do with the
money that they cannot spend, so much that they cannot spend. That`s in
the "Rewrite."

(COMMERCIAL BREAK)

O`DONNELL: The vote totals are coming in slowly tonight in the Kansas
Republican Senate primary. With about 27 percent of the precincts
reporting, incumbent Republican Senator Pat Roberts has a 10,000 vote lead
at this point in the night. That puts Roberts with 50 percent of the vote
and his Tea Party Republican challenger Milton Wolf with 39 percent of the
vote.

Milton Wolf`s mother and President Obama`s grandmother -- see if you can
follow this -- are first cousins. Making Milton Wolf President Obama`s
second cousin once removed. They only met President Obama after he was
elected.

Senator Roberts raised questions about Wolf`s judgment after Wolf, who is a
doctor, posted some x-ray images of people on Facebook along with some
morbid humor.

More election results as we get them.

Coming up next, the drama, the melodrama being laid out in court in a
corruption trial. The trial of former Virginia Governor Bob McDonnell.

(COMMERCIAL BREAK)

O`DONNELL: Tomorrow marks the eighth day of the political soap opera that
is the federal corruption trial of Bob and Maureen McDonnell. The former
Virginia Republican governor and possible presidential hopeful and his wife
are facing a 14-count public corruption indictment that charges them with
trading the influence and prestige of the governor`s office for money and
gifts from the former CEO of a dietary supplement company.

Prosecutors allege that the former first couple of Virginia promoted the
products of businessman Jonnie Williams in exchange for more than $165,000
worth of gifts, including a lavish New York City shopping spree, golf
clubs, a Rolex watch and the catering for their daughter`s wedding.

Defense attorneys for the couple are arguing that Governor McDonnell did
not promise anything to Jonnie Williams and that Maureen McDonnell accepted
the gifts because she had a crush on the businessman and her marriage to
the governor was falling apart.

According to "The Washington Post," McDonnell`s lead defense attorney said
Jonnie Williams was larger than life to Maureen McDonnell. But unlike the
other man in her life, Jonnie Williams paid attention to Maureen McDonnell.

Yesterday McDonnell`s former campaign manager testified that in 2012 he
heard Maureen McDonnell tell Ann Romney that a dietary supplement like --
Anatabloc, right? Anatabloc . Don`t put words like that in the
teleprompter anymore. They don`t matter. The product made by Jonnie
Williams -- could we just said that? The product made by Jonnie Williams
company could help cure Mrs. Romney`s multiple sclerosis. The campaign
manager said he was horrified by the exchange and thought it was a train
wreck.

Joining me now is "Washington Post" columnist and MSNBC political analyst
Dana Milbank and also of the "Washington Post," Matt Zapotosky, who has
been in the courtroom for the McDonnell trial since the beginning. He is
joining us from Richmond.

Maybe you guys can pronounce that dietary supplement that`s in the case but
we don`t have to do that.

But, Dana, this defense is the one that no one saw coming. It is a marvel
to be hold. How -- I mean, we always try to guess how it`s working in the
courtroom and what is the guess at this point?

DANA MILBANK, MSNBC POLITICAL ANALYST: Well, my guess is that Governor
McDonnell was taking some rather peculiar nutritional supplements.

(LAUGHTER)

MILBANK: However you pronounce them, to decide that this would be a good
idea to do. He was offered a plea deal in December that said one count,
nothing to do with his official duties, his wife gets completely off the
hook. We would have forgotten all about Bob McDonnell right now. But
instead, out of hubris, out of wanting to clear his record, he`s decided to
bring this into the courtroom. Basically dump the whole thing on his wife.
Even have his daughter up there tearfully on the stand.

So before he looked like maybe he was a crook. Now he looks like he`s a
crook and a cad. And I don`t know better than I do but it doesn`t appear
that his defense is working so far.

O`DONNELL: Matt, on that plea deal, was he -- was he going to have to do
any jail time on that plea deal?

MATT ZAPOTOSKY, WASHINGTON POST: You know, it`s hard to say. He couldn`t
reach an agreement where explicitly he would have no jail time, but his
exposure was a whole lot less than it is now. They came to agree upon
sentences in this particular district in federal court. But with the one
charge of lying on financial documents, it`s nothing like he`s looking at
now if he were to get convicted of the 14 counts or 13 counts against him.

O`DONNELL: And Matt, as the evidence is unfolding, are they going to be
pleading ignorance of the law in this case?

ZAPOTOSKY: No. I think what they`re pleading is, look, the government`s
got to prove a couple of things. One is that the two of them conspired
together. You talked a little about their defense. The upshot of that is,
their marriage was so broken. Maureen was -- had some interest in Jonnie
Williams. So they couldn`t have conspired, they weren`t talking.

Another element is look, these gifts are really bad looking. There`s a
Rolex, there`s a Ferrari ride, there`s luxury vacation, there`s -- you
know, $120,000 in loans, that looks really bad. But what about the other
side, what the governor did for Jonnie Williams. And the defense is saying
that`s not much, it`s not enough to constitute a crime.

O`DONNELL: And Dana, there`s also this issue that I don`t think -- I`m not
sure they can get this in front of the jury that many of the things that
they`ve done here or being charged with having done here would not be
crimes under Virginia law.

MILBANK: Well, the thing to understand here is the idea of proving quid
pro quo is a very difficult thing to do in these public corruption cases.
So they can -- you know, it`s not really even disputed, all the amount of
gifts and money that were lavished on the governor and his family. And
it`s also very clear that the governor himself and particularly his wife
tried to do all kinds of things for Johnnie Williams.

It`s not clear that he actually got much value out of it. Now that may
have been because he had a lousy product that they couldn`t sell despite
the governor`s best efforts. So it is a difficult thing to prove. That`s
what McDonnell is counting on here. But it just seems like even if he wins
in court, it`s such a puric victory at this point.

O`DONNELL: And Matt, Jonnie Williams is where this whole case resides
apparently for the prosecution. Defense attorneys in cases like this
normally kind of point to that person who turned state`s evidence and is
very much involved in the crime themselves and say how can you possibly
believe this person? How can you believe him? How is his credibility
played so far?

ZAPOTOSKY: Oh, I mean, absolutely. That is the central issue of the case
so far. And last week, I`d say defense attorneys got some good shots in at
him. You know, when they asked him all about these various meetings he had
with law enforcement, he had a lot of trouble remembering, he himself is a
salesman. And I think that came across to jurors, you know. He talked
about this product that he`s trying to sell. The origins of it was sort of
that he took some tobacco, threw it in the microwave and removed the cancer
from it.

I mean, he isn`t exactly the ideal witness if you`re a prosecutor. But
look, this week he held up a little bit. When he came back to the stand on
Monday, he was a little bit charming. Jurors were laughing. People in the
court were laughing at some of his jokes. Did he held up to cross-
examination? Probably about as good as prosecutors could expect.

O`DONNELL: Matt Zapotosky, Dana Milbank, you guys are making me wish I was
in that courtroom. Thank you very much for joining me tonight.

MILBANK: Thanks, Lawrence.

O`DONNELL: Thank you.

ZAPOTOSKY: Thank you.

O`DONNELL: Coming up, Tim Harris, the man who hugged President Obama. The
big hug you saw it here last night. He`s going to join me later.

(COMMERCIAL BREAK)

O`DONNELL: In the "Spotlight" tonight, living in the crossfire of gun
violence in America. In Chicago, Gwendolyn Baxter (ph) is trying to help
kids who have heard a few too many shots fired.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Those people forget, saw people. But as a mother you
never, ever, ever forget.

My son was murdered in 2003. And after the rollercoaster, the emotional
rollercoaster, the grief, the pain, it was my hope that I could stop
another mother from having to experience what I had to experience, to
grieve the way I had to grieve.

How many people in here have lost someone to violence?

We do circles, we do conference, resolution circles, we do talking circles
and we do healing circles.

UNIDENTIFIED MALE: I lost three very close people to me. Two was killed
by the police and one was killed by gang violence.

UNIDENTIFIED FEMALE: In the circles we talk about everything that happens
in the community. Everything that affects their lives. And everything
that affects the future of our young people.

UNIDENTIFIED MALE: Tell him (INAUDIBLE) jail time because a lot of people
because they don`t have anybody to talk to. And sometimes --

UNIDENTIFIED FEMALE: So that make you reflect on your action before you
actually doing it.

UNIDENTIFIED FEMALE: They have to deal with hearing gunshots. They have
to deal with being shot. They have to deal with the fears of dying.

(END VIDEO CLIP)

LAWRENCE O`DONNELL, MSNBC ANCHOR: Joining me now is MSNBC.com`s Trymaine
Lee whose latest article is entitled "trauma in the trenches of gun-weary
Chicago."

What did you find there?

TRAYMAINE LEE, MSNBC.COM: There is indeed a crisis going on in the streets
of Chicago. It`s not always just the one that we hear about, the violence.
It is what happens after the last bullet was fired and after the body is
dragged off and after the blood is cleaned up.

The collective wait that young people are going through, the collective
wait of families witnessing murders, witnessing shootings, being scared to
leave their homes. I talked to dozens of young people in the community.
And the ethnics, they have to run through gang waves because they`re afraid
to go on certain blocks. They have to stay in their rooms. Multiple
people -- to a personal (INAUDIBLE), they have known a friend to be killed,
a family member to be killed.

And so, we kind of have a good idea about how to treat PTSD in soldiers
with this very terrible things. But we are not so good in treating the
communities where these people are seeing terrible things, day in and day
out. And it`s quite shocking that they display the resilience and the
avoidance that they do because what is happening in the street, it is sure
madness.

O`DONNELL: You draw a lot of parallels to PTSD in this article. This is
different. I mean, PTSD, if you were exposed in your humvee in Afghanistan
to explosions every time you went out there in the humvee, but now you`re
in a humvee in Arizona and you`re worried about explosions, that`s PTSD,
that`s an irrational response to where you are.

They are still in the zone, in the -- where the firing is going on. And it
seems to me a lot of their reactions in here are actually kind of rational.
Staying home is rational and being worried is rational.

LEE: It`s quite rational. But we`re talking about the lingering effects
of witnessing a, and the anxiety, the nightmares, the day in and day out,
really harboring that fear. And so, kind of like where it switches in the
brain. You`re always in a heightened state of flight or fright. And if
someone as if a bear is attacking you. And every time you go outside, the
bear is eating your neighbor. And then it is on your doorstep. And it is
in the street.

And so again, how do we address what`s happening? And when you think of a
crisis, when you think about what needs to be pumped in, the resources, so
a person, they said I`ve never seen a counselor. The city tells me, they
said, you know, we`re working in the schools. We have millions of dollars
dedicated to behavioral sciences, but none of that reaches the community.
The people I have talked to have ever seen a counselor. Once the cameras
are going and the politicians are finished talking, no one is there to hear
their voices.

O`DONNELL: Now, the homicide rate declined last year in 2013. It may be
on the way down. It certainly went on the way done last year. But what do
you think are the successful interventions in terms of this traumatic
syndrome that is going on there that could be tried?

LEE: And speaking of counselors, I spoke to one counselor who has a
private practice in (INAUDIBLE). She works in some of these hardest hit
communities. The private practice folks, very complicated sense of self
that they have to work through.

When you`re in the community, the kids need their stories validated.
Because they have bury it, One is for survival. If they had to stop and
delve and reflect every time something tragic happened in the community, it
would happen every single day. But for them to have the opportunity to
meet with a professional, first of all because one thing that was missing
here is people don`t often identify the symptoms of PTSD. They don`t
identify the aggravation anxiety.

But for them to meet with a professional or someone that can just listen to
their stories and validate it and tell them that it`s OK to feel hurt,
because you will see in the streets, they put on this tough mask, right?
They end up deflecting and projecting a lot. But they hurt inside. And
these are kids that we`re talking about. And that`s where the heart of the
problem is. They don`t have -- they don`t have anywhere to turn.

Another rightly important report by Traymaine Lee. Traymaine, thanks very
much for joining us tonight.

LEE: Thank you.

O`DONNELL: Coming up in the rewrite, income inequality. It`s our first
rewrite on income inequality. And the very first thing we are going to do
is rewrite that phrase, income inequality.

(COMMERCIAL BREAK)

O`DONNELL: And now for the good news. There was once a couple from
Limerick -- no really, this is a true story. A couple from Limerick,
Ireland was on their honeymoon and their dog finds was off having his own
adventure. The Fox staying with the bride`s parents near the town of
Kilkee, in county Clare. Kilkee is known for its dramatic cliffs that rise
high above the Atlantic ocean. Vimes got too close to the edge, lost his
fooding and fell 300 feet to what was surely his end. But the Irish coast
guard dispatched a rescue boat and they found the dog at the base of the
cliff, having somehow survived the 300 foot plunge. The owners thanked the
rescuers and so did the vimes.

This tweet from the dog reads, I would like to give massive thank you to my
new heroes Kilkee rescue for saving me yesterday when I walked off a 300
foot high cliff. Taking it easy now when I`m not causing a small maritime
crisis.

You can follow, Vimes, the dog on twitter. The rewrite is next.

(COMMERCIAL BREAK)

O`DONNELL: Tonight`s rewrite, income inequality. And the first thing we
have to do to discuss this subject is rewrite that phrase, income
inequality. Economists know what they mean when they say it, but too many
civilians don`t.

(BEGIN VIDEO CLIP)

BILL O`REILLY, FOX NEWS ANCHOR: The truth is, there will never be equality
in this world. It`s impossible. And opium laced dream.

(END VIDEO CLIP)

O`DONNELL: And that is the perfect example of the problem with the phrase
"income inequality." Some people who haven`t spent enough time in
economics classes seem to think that the alternative to income inequality
is income equality. And no one is suggesting that we should have income
equality.

So let`s use the more descriptive phrase income distribution. There`s an
important new entry in the debate about income distribution in this
country, an economic research report so it does use the phrase income
inequality in its title because it correctly assumes everyone who is going
to read this report understands that it is not advocating income equality.

The report comes straight out of Wall Street deep in the valley of the
(INAUDIBLE). So you can assume that the report says there`s nothing wrong
with this picture.

The line at the top is what`s happened to the top one percent of income
earners in this country since 1979. They have captured an ever larger
share of our national income. Here`s how President Obama describes that
picture.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Since 1979 when I graduated
from high school, our productivity is up by more than 90 percent. But the
income of the typical family has increased by less than eight percent.
Whereas in the past the average CEO made about 20 to 30 times the income of
the average worker. Today`s CEO now makes 273 times more. And meanwhile,
the families in the top one percent has a net worth 288 times higher than
the typical family, which is a record for this country.

(END VIDEO CLIP)

O`DONNELL: Wall Street has produced more of the sharp spikes in income
distribution than any other industry in this country. Wall Street jobs
that used to pay hundreds of thousands of dollars in 1979 now pay millions
of dollars, tens of millions of dollars and hundreds of millions of
dollars.

So no one working on Wall Street is going to see anything wrong with this
picture, right? Who on Wall Street would worry about what they see in this
picture? Anyone who want the rich to get richer should actually worry
about what they see in this picture. And that worry is clearly expressed
in this new report I`ve been referring to. It is from Standard and Poors
global credit portal entitled how increasing income equality is dampening
the U.S. economic growth and possible ways to change the tide.

This is an unemotional document. This report doesn`t care about fairness.
This report does not make a moral case about income distribution. This
report doesn`t ask the question, is our income distribution fair? Instead,
it asks this.

Would the U.S. economy be better off with a narrower income gap and if an
unequal distribution of income hiders growth, which solutions could do more
harm than good and which could make the economic pie bigger for all?

To the question of would the U.S. economy be better off with a narrower
income gap, this Standard and Poors report says, in a word, yes. The
report agrees with what President Obama told Joe the plumber in 2008.

(BEGIN VIDEO CLIP)

OBAMA: My attitude is that if the economy is good for folks from the
bottom up, it`s going to be good for everybody. If you have a plumbing
business, you`re going to be better off if you have a bunch of customers
who can afford to hire you. And right now, everybody is so pinched that
business is bad for everybody. And I think when you spread the wealth
around, it`s good for everybody.

(END VIDEO CLIP)

O`DONNELL: Here`s how the Standard and Poors report says what you just
heard President Obama say. We see a narrowing of current income -- of the
current income gap as beneficial to the economy. In addition to
strengthening the equality of economic expansions, bringing levels of
income and inequality under control would improve U.S. economic resilience
in the face of potential risks to growth. From a consumer perspective,
benefits would extend across income levels, boosting purchasing power among
those in the middle and lower levels of the pay scale while the richest
Americans would enjoy increased spending power in a sustained economic
expansion.

See? Nothing`s changed. Wall Street is still looking out for the rich
guy. But in this report, the best way to look out for the rich guy is to
look out for the little guy at the same time, and everyone in between.
It`s counterintuitive, but income inequality is hurting the rich in the
long run, too.

At extreme levels, income inequality can hurt sustained economic growth
over long periods. The U.S. is approaching that threshold. Standard and
Poors sees extreme income and inequality as a drag on long run economic
growth. We have reduced our ten-year U.S. growth forecast to a 2.5 percent
rate. We expected 2.8 percent five years ago.

Spending is the fuel for economic growth. And if you literally have more
money than you know what to do with, then that money is not going to be
pumped back into the economy as spending. If you have all the houses you
think you need and all the yachts you think you need and all the private
planes you think you need and you still have tens of millions of dollars
left over and tens of millions of dollars in new income coming in next
year, then very little of your new income is going to be used for new
spending. And the economy always needs new spending.

And in the lower half of the income scale where people have no savings, and
not enough money to make ends meet, they have to cut back on their
spending. Long-term, those two conditions, can strangle the economy.
People with increasing amounts of money that they can`t possibly think of
ways to spend. And people with not enough money who have to cut back on
their spending. And a strangled economy is bad for everyone, including the
super rich.

That`s what the Standard and Poors report is alerting Wall Street about.
Worrying about income inequality is now way too important to be left to the
liberals, according to this Wall Street report.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Do you suggest anyone who questions the policies and
practices of Wall Street and financial institutions, anyone who has
questions about the distribution of wealth and power in this country is
envious, it`s about jealousy or is it about fairness?

MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: You know, I think it`s
about envy. I think it is about class warfare.

(END VIDEO CLIP)

O`DONNELL: Standard and Poors is not envious of great wealth in this
country. Standard and Poors is in the business of helping supply the
building blocks of great wealth. This Standard and Poors report is a
breakthrough in the debate over income distribution in this country. It
has the power to change some minds on the subject, because it doesn`t come
from a political party. And most importantly, it rewrites the terms of the
debate because it doesn`t mount a moral argument that absolutely will not
be heard by people whose minds are closed to such arguments.

Instead, it makes its case based on the most elementary conservative
economic theory, self-interest. What is helpful to you getting richer is
their question. And the report`s answer is, what is helpful to you getting
richer is everyone getting richer. Something that should not take a lot of
economics classes to understand.

The Standard and Poors report concludes with this. the challenge now is
to find a path toward more sustainable growth. An essential part of which,
in our view, is pulling more Americans out of poverty and bolstering the
purchasing power of the middle class. A rising tide lifts all boats. But
a lifeboat carrying a few surrounded by many treading water risks
capsizing.

Standard and Poors, once again, standing up for the rich guy, and this time
standing up for everyone else.

(COMMERCIAL BREAK)

O`DONNELL: Tim Harris is here and he`s joining me next. But first, let`s
take a look why Tim is suddenly so famous.

(BEGIN VIDEO CLIP)

OBAMA: Tim Harris is a special Olympian in basketball, hockey, volleyball,
golf and track and field. So he has all four seasons covered. Now, he has
a restaurant Albuquerque called Tim`s Place. The most popular item is the
hug Tim gives his customers. And so, for our more than 42,000 have been
served. So where`s Tim? There he is right there. Tim`s fired up. Tim is
fired up. Although Tim, I didn`t get a hug. Come on, man. Here we go.
All right. Come on, man. Come on, buddy.

TIM HARRIS, OWNER, TIMS` PLACE RESTAURANT: I love you, Obama.

OBAMA: I love you back. You know, presidents need some encouragement once
in a while, too. That felt really good. That was nice. Thank you, Tim.

(END VIDEO CLIP)

O`DONNELL: Joining me now from his restaurant in Albuquerque, New Mexico,
Tim`s place, is Tim Harris, special Olympic athlete, restaurateur and big
giver of hugs. And with Tim is Ryan Retundo, general manager of Tim`s
place. And he is also a family friend.

Tim, tell us what it was like to be in the White House and how surprised
were you when the president called your name? What did it feel like going
up there to give him a hug?

HARRIS: It felt really good to be in the White House. And it was kind of
like being part of family. I gave him a hug and it made me feel awesome
and made him feel special, too.

O`DONNELL: What was your reaction afterwards when you heard the president
say how much he appreciated that and he could use that? It seems like the
president could use a few more hugs these days, doesn`t it?

HARRIS: Yes, he could use some more hugs.

O`DONNELL: And you met a lot of other people at the White House that day.
Who else did you meet?

HARRIS: I met Stevie Wonder, Katy Perry and (INAUDIBLE).

O`DONNELL: And we have a little video of you, Tim, from AOL. AOL has a
video of you dancing. You don`t just hug, you also dance. Let`s take a
look at this.

(BEGIN VIDEO CLIP)

HARRIS: I am so excited to go to work. So I do a dance in the parking
lot. It`s a dance of magic. We serve breakfast, lunch and hugs. The hugs
are the best part. I am Tim Harris. And this is my place. Oh, yes.

(END VIDEO CLIP)

O`DONNELL: Tim, that is a great video. How did you get the idea to do
these hugs in your restaurants and do it so much in your restaurant?

HARRIS: Well, I am born a hugger.

O`DONNELL: And so it`s just your natural impulse when you see people,
that`s the way you feel?

HARRIS: Yes. I love giving everybody hugs. It makes me feel awesome and
it makes everybody in my restaurant feel a lot happier.

O`DONNELL: Now Tim, I suppose most people who come to your restaurant have
been there before and they know about you. You have your regulars. But
what about someone just driving through town, never been there before.
Have you ever had anybody be really surprised by it and kind of -- and not
know what to do when you give them a hug?

HARRIS: Actually, they get out of their car and take pictures of the
restaurant and then come in. And I`m at the front door doing my job and
tell them, have you been here before? They tell me they have not. I tell
them my name is Tim Harris, and I am the store owner.

O`DONNELL: And then do they get the big hug?

HARRIS: They can get a hug or they can ask their server to come by for
their hug.

O`DONNELL: Yes, you`re pretty famous in that area already.

Tim Harris and Ray, thank you very much for joining us with Tim tonight.
Thank you both very much. Appreciate it, Tim.

HARRIS: Thank you.

O`DONNELL: Ezra Klein is next tonight, in for Chris Hayes.

END

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