updated 2/3/2005 11:37:25 AM ET 2005-02-03T16:37:25

Guest: Ron Silver, Hilary Rosen, John McCain, Trent Lott, Laura Ingraham, Nicole Devenish

CHRIS MATTHEWS, HOST:  Tonight, the State of the Union.  Is Iran the next axis of evil country to fuel President Bush‘s strength?  And how much political capital will the president risk to change Social Security? 

Let‘s play HARDBALL. 

Good evening.  I‘m Chris Matthews.

On the heels of this week‘s successful elections in Iraq, President Bush will deliver his fourth formal State of the Union.  Just two hours from now, he‘s expected to talk about the war on terrorism and unveil more details of his plan to overhaul Social Security. 

Nicole Devenish is an assistant to the president.

Nicole, thank you for joining us tonight and congratulations on your appointment.         

NICOLE DEVENISH, ASSISTANT TO PRESIDENT BUSH:  Thanks, Chris. 

MATTHEWS:  Let me ask you, will we get a lot of detail on the Social Security plan? 

DEVENISH:  Chris, I think you‘ll have plenty to chew on in the coming nights. 

I think that—and you know this from being on my side of the business—when you have the opportunity to deliver an inaugural address and then on its heels deliver a State of the Union, you have a rare opportunity to really set the tone for your second term and to lay out a clear blueprint for where and how you will lead. 

And what the president does tonight, I think you will recognize as very bold.  He calls on Congress and reaches out to Democrats and Republicans to take on the big issues and the ones that really would allow us to leave the government and this country in better shape for future generations.  He poses the question, what can we do to improve the state of our children and grandchildren‘s Union? 

MATTHEWS:  Will the people tonight, say, younger people like yourself, who are just getting started in the workplace, will they know at the end of tonight what it means to them to be able to have a personal Social Security account? 

DEVENISH:  They will, Chris. 

And, you know, what they‘ll understand is that a—they‘ll understand how the personal accounts work, which is a critical first step when you‘re trying to build support around a new and big new idea and a way to preserve Social Security and really help young people and help future generations feel that they can rely on Social Security.  And what he‘ll talk about is how some of the money that we send to Washington in our taxes would become part of a personal account that we could seize more control of. 

And I think it is an idea that will be very popular.  And it seems like the farther away you get from the beltway in Washington, the more common sense prevails.  And so we‘ll take this debate on the road tomorrow and Friday.  And I think someone said earlier today that the third rail of Social Security may become someone who advocates inaction. 

MATTHEWS:  Well, let me ask you about inaction, because the Democrats are, as you know, using the politics of fear here.  They‘re saying that the president‘s proposing taking a third of the revenue source for Social Security by putting it in to private accounts.  He is taking it away from the Social Security fund. 

You‘re 65 years old, you‘re 85 years old watching tonight.  How do you know that‘s not going to endanger your check each month? 

DEVENISH:  Well, the Democrats may be disappointed when they hear the details tonight, because we will certainly assure anyone near or at retirement age that this debate, while it may interest them from a public policy perspective, will have absolutely no impact on their benefits and on their experience and what they receive from the Social Security system. 

The debate is focused on those of us who are already skeptical about whether Social Security will actually be there for us.  And, yes, we certainly will have details about the cost and how it will work.  And I don‘t want to steal all the president‘s thunder. 

MATTHEWS:  Right.

DEVENISH:  I want to make sure you watch.  But, certainly, tomorrow morning, people will be debating and talking about and explaining to each other at the water cooler just how those personal accounts would work. 

And that‘s a debate that the president is very excited about leading.  And he knows that a lot of the work that the members of Congress will have to do and looks forward to working with Democrats and Republicans. 

MATTHEWS:  You know, as you know well, in 2002, the president gave a State of the Union where he laid out what he saw as the threat to America‘s security, the axis of evil.  Those were the great words from that speech that everyone recalls. 

High on that list was Iraq, but also Iran and North Korea.  In the recent weeks and months, we‘ve heard about the development of nuclear weapons in the country of Iran.  The president has a commitment standing right now, I believe, to stop them from doing it.  How strong is that commitment and what will he do to keep Iran from developing into a nuclear power? 

DEVENISH:  Well, let me just take one step back, if would you allow that, and tell you how the president talks about securing peace and spreading freedom in the broader Middle East.  And, again, we‘ll give you plenty to chew on and talk about tonight after the speech.  But I‘ll let him break most of that ground. 

But he certainly takes a look at the goal of spreading freedom and democracy in the broader Middle East.  And we all know where he stands on that.  He‘s talked about working with our allies.  And he has talked about making sure and addressing and dealing with nations that harbor terrorists and seek weapons of mass destruction.  So you‘ll certainly hear him.  And I think there will be some new and memorable language in the speech.  But I‘ll let you be the judge of that. 

MATTHEWS:  Lastly, what is his mood after Sunday‘s successful elections in Iraq? 

DEVENISH:  Well, I saw him today at lunchtime.  And he was very focused on the substance of the speech.  I mean, he‘s very much in a—and you‘ll hear it tonight.  The section on Social Security is very explanatory.  He takes on the role tonight as explainer in chief. 

And he feels it is his obligation.  And we feel very privileged to have the opportunity again to deliver these two big speeches, with large numbers of the American people tuning in to explain exactly how he envisions the personal accounts working, the path forward in Iraq on the war on terror, and a broader domestic agenda with some new initiatives in there as well. 

MATTHEWS:  Has he got his game face on? 

DEVENISH:  He does.  He sure does.  That‘s the best way to put it. 

MATTHEWS:  OK, thank you very much. 

DEVENISH:  Thanks, Chris. 

MATTHEWS:  Again, congratulations, Nicole Devenish.

DEVENISH:  Thanks a lot.  Thanks for having me.

MATTHEWS:  Let‘s to go my panel tonight.  Laura Ingraham is a radio talk show host.  “Newsweek”‘s Howard Fineman is also an NBC News political analyst.  Joe Scarborough is host, of course, of MSNBC‘s “SCARBOROUGH COUNTRY.”  He has got his own country. 

(LAUGHTER)

JOE SCARBOROUGH, HOST, “SCARBOROUGH COUNTRY”:  That‘s pretty good. 

MATTHEWS:  And David Gregory is NBC News White House correspondent.  And, tonight, he‘s at the White House. 

David, the same question to you.  The game face is on? 

DAVID GREGORY, NBC WHITE HOUSE CORRESPONDENT:  Oh, I think it is.  I think the president has got a unique opportunity here to come off the inaugural, talk about the rest of the world.  He‘ll do that tonight. 

But this is what he has to do.  He has to sort of break through the filters, speak directly to the American people and start to campaign for Social Security.  There are a lot of Republicans, principally, who have been nervous about the way he‘s been talking about this.  They feel like they‘re not winning the P.R. war over this.  So, he has got to help them.

He‘s really got to carry the ball.  He has got to convince Americans that there‘s enough of a problem to really take this issue on.  And I think you‘re also going to hear him signal that he is really—that he is ready at some point to do some business here with Democrats, which is, frankly, the only way he‘s going to get any of this done. 

MATTHEWS:  Is he willing to throw some of it on as a bargaining chip, for example, the personal accounts or the reduction in benefits now to be based on CPI, rather than wages?  What is he more likely to give, on the reduction wage benefits over time because of a different basis or this principle of letting people have their own accounts? 

GREGORY:  Well, I think one of the things he‘ll say tonight is that they‘ll phase in these accounts.  In other words, we are not going to create them all at once.  If you‘re a younger worker, younger than 55, you can start to deposit up to $1,000.  And then it can grow over time.  So you don‘t have to pay it all, all the transition costs up front.  That‘s what plenty of moderate Republicans and Democrats are worried about, if they‘re deficit hawks.

MATTHEWS:  Right. 

GREGORY:  On the other side, I think he‘s going to signal that there‘s a lot of room on things like indexing and even the retirement age. 

MATTHEWS:  OK, stay with—thank you very much, David Gregory, at the White House.

Let‘s get to our panel.

He could make it really wild tonight, Joe, and say, would you like to be under 35? 

(LAUGHTER)

MATTHEWS:  You could actually choose your age after tonight. 

SCARBOROUGH:  That would be nice.

MATTHEWS:  Now, seriously, you‘ve warned us on this program many times during this past campaign, about the delusion of trusting young people to become civically active.  Don‘t put your future, base your future of your campaign on young people turning out. 

Let‘s go to the other end, because you know about older voters. 

SCARBOROUGH:  Yes. 

MATTHEWS:  If you had run for reelection as a congressman today, would you risk all on having the older voters on Social Security trusting you to change the system? 

SCARBOROUGH:  If I wanted to get reelected, I would be very careful.  And I‘ll tell you why. 

You have got two group of people—two groups of people in the Republican Caucus.  You have those that were elected before 1982.  They remember being slaughtered in 1982 when they touched Social Security.  And you have those of us who came in, in 1994, who wanted to do all these great things, who believed we were going to change the way Washington worked.  And you know what derailed it?  Taking on a middle-class entitlement, Medicare. 

Bill Clinton lied over and over again.  He said, they want to cut your Medicare benefits to give tax cuts to the rich.  That is a lasting political scar.  I have got to tell you, more than impeachment, more than China-gate, more than Monica-gate, that is the one thing the class of ‘94 remembers, being brutalized over Medicare. 

And a lot of them are telling me they are not going to make the same mistake twice.  So that‘s the president‘s biggest challenge. 

MATTHEWS:  Laura Ingraham.

LAURA INGRAHAM, RADIO TALK SHOW HOST:  I think this is a bold move by the president. 

But I think, after the election, Chris, he said, I have political capital and I‘m going to spend it.  I think he thinks, after the election on Sunday in Iraq, he has a little bit more political capital.  And he‘s going to spend it. 

MATTHEWS:  Is this like a sailor‘s weekend, though?

(LAUGHTER)

INGRAHAM:  Well, I think...

SCARBOROUGH:  It‘s a seller‘s market.

INGRAHAM:  When I was thinking about...

(CROSSTALK)

MATTHEWS:  I got to feel real loose like a long-legged goose.  Got to spend my money.

(CROSSTALK)

MATTHEWS:  Is he going to spend too much too fast?

(LAUGHTER)

INGRAHAM:  Joe‘s point about the fight is exactly right.  It is going to be difficult. 

But just like the heartland tour, all the singers, the Springsteen, the vote for change tour. 

MATTHEWS:  Right. 

INGRAHAM:  When he goes to North Dakota, when he goes to Florida, when he goes to Arkansas, it is going to be his version of this vote for change tour.  And it is either going to be powerful or it‘s going to kill him in this year. 

MATTHEWS:  Howard, the difference is, this isn‘t thematic and macro.  This is about your own individual pocketbook. 

I always think of the person, because I expect to be one, if I‘m lucky, about 82, a little fragile, not older.  Old.  OK?  And you‘re old and you know you have got one source of income for sure.  That‘s in the mailbox.  And you want that to be there without any question.  And you hear the Democrats—and they will raise this issue—hey, he‘s diverting a third of the money to these kids and their crazy accounts and they‘re going to put it in the stock market and lose.  Then we‘re going to have to pay for it out of system. 

HOWARD FINEMAN, NBC CHIEF POLITICAL CORRESPONDENT:  That‘s why the first thing that the president is going to say on this tonight is, if you‘re 55 or older, don‘t worry.  Everything is fine.  Your system won‘t be touched.  Nothing will be diverted. 

MATTHEWS:  Is that what the Democrats are going to say? 

FINEMAN:  No.  The Democrats are going to say...

MATTHEWS:  We got trouble in River City. 

FINEMAN:  The Democrats are going to say that the transition to this is going to cost at least $1.5 trillion over 20 years. 

MATTHEWS:  Out of the fund.  Out of the fund. 

FINEMAN:  Over the fund.  You have to borrow more money to do it.  That is going to put even more burden on the younger people. 

(CROSSTALK)

MATTHEWS:  Is that the smartest thing the Democrats have done in the last few days, is shift it not to whether you like the principle of personal accounts or whether we‘d like to have more individual power, but taking money out of the system?

(CROSSTALK)

INGRAHAM:  Here‘s the problem, Chris. 

The internal polling the White House has been looking at, under 45, there‘s huge support for this, under the age of 45.  They‘re looking at these numbers.  The message tonight also is going to be, you‘re not going to worry if you‘re over 55 about getting benefits cut.  And, also, do some for this younger generation.  Don‘t be a roadblock to this. 

MATTHEWS:  Really?

INGRAHAM:  I think that‘s going to be part of it.  Your grandchildren deserve a retirement that is going to be there. 

(CROSSTALK)

FINEMAN:  It‘s really interesting. 

INGRAHAM:  That‘s going to be part of it.

FINEMAN:  Because, in the election, the presidential election, John Kerry, the Democrat, won among voters under 30.  And yet, Laura is right.

INGRAHAM:  Under 45.

(CROSSTALK)

FINEMAN:  On polling on this issue, they‘re more susceptible to the Republican message. 

MATTHEWS:  Who is going to vote in the midterms, Joe, old expert that you are?

SCARBOROUGH:  Yes. 

MATTHEWS:  Who will vote in the midterms, the people under 45 or the people...

SCARBOROUGH:  Hah!

MATTHEWS:  You are learning my laugh.  You are learning my laugh. 

(LAUGHTER) 

INGRAHAM:  What is that?

SCARBOROUGH:  Just like I told for three nights before the election, young voters don‘t get out and vote.  What I always tell new politicians, they come to me, they say, oh, the young people are so—I said, well, that‘s great.  But they‘re not going to vote for you. 

MATTHEWS:  Didn‘t you say—didn‘t you say rock concerts and T-shirts don‘t count? 

SCARBOROUGH:  They don‘t. 

And I‘ll tell you this, though.  And let me tell why you this is so dangerous for the Republicans.  And I respect the president for going after it, but why it is an opportunity for Democrats, because the way Republicans win, the way we‘ve been winning since the McGoverns took oh the party, was by going to the middle-class, saying, Washington doesn‘t understand.  They‘re endangering the middle-class way of life in middle America; 1995...

MATTHEWS:  OK.  We have to go on that point, Joe. 

SCARBOROUGH:  Well, you can do that with middle-class entitlements.  They did it in ‘95.  And they‘re going to do it again.

MATTHEWS:  I think you have the viewers‘ attention with that one.

We‘re going to come right back with Joe Scarborough.  The panel is staying with us. 

(CROSSTALK)

MATTHEWS:  And when we come back, a top Republican in the Senate tells us what he expects to hear from the president tonight in the State of the Union.

And, later, Senator John McCain will join us. 

You‘re watching HARDBALL‘s State of the Union coverage on MSNBC. 

(BEGIN VIDEO CLIP)

JOHN F. KENNEDY, PRESIDENT OF THE UNITED STATES:  I can report to you the state of this old, but youthful Union is good. 

GERALD FORD, PRESIDENT OF THE UNITED STATES:  Tonight, I report that the state of our union is better. 

WILLIAM J. CLINTON, FORMER PRESIDENT OF THE UNITED STATES:  Ladies and gentlemen, the state of our union is strong. 

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  The state of our union has never been stronger. 

(CHEERING AND APPLAUSE) 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(NEWS BREAK)

MATTHEWS:  Coming up, a leading Republican senator on the challenges facing President Bush tonight.

HARDBALL returns after this.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

Social Security has been called the third rail of American politics.  Touch it and you die.  Tonight, when President Bush speaks before the House chamber, he‘ll present an ambitious agenda to reform Social Security.  But many minds in Congress are already made up on the issue. 

Joining us right now is Senator Trent Lott, Republican of Mississippi. 

Senator, explain the hazards the president is going to face in pushing this agenda.

SEN. TRENT LOTT ®, MISSISSIPPI:  Well, it‘s a big order.  It will involve a lot of information. 

We have got to get the American people.  It has got to involve reassuring those that are 55 and older, look, your program is going to be fine.  My mother, Iona Lott, in Pascagoula, Mississippi, at 91, she is going to know that the benefits will be there for her. 

But, also, the president has got to explain more and get people really thinking about what the opportunity to have a personal savings account really will mean, not only for our children and grandchildren, but for the economy and how much difference it would make in retirement if you had that extra personal savings account.  So he is going to really begin to shape the debate tonight.  I think he is going to make it clear as we go forward.

Look, he is not going to dictate every detail.  That‘s what we‘ll do in Congress.  And we have got to stop saying what we are not going to do and start talking about, what are the solutions here?  How can we make sure Social Security is protected and strengthened and how can we do more for our children and grandchildren?  We need to be honest and we need to do the right thing.  I do believe the demographics have changed, Chris, to where politically, we can do this. 

MATTHEWS:  Well, let me ask you, what do you tell to the older person or person 55 and older about where the money is coming into the Social Security system if young people are allowed to take their money, or a third of it, and put it into private accounts? 

LOTT:  We need to first convince people that these private savings accounts, or personal savings accounts, can be done, that there‘s a real benefit from that. 

And then, again, we can say to the older people, if you are true about it or tell the truth about it, we‘re not getting enough coming into the system now anyway.  And beginning in like—I mean soon, like when my generation, when my age group starts retiring in three years or so, you‘re going to have such a tremendous drain on the Social Security program, if we don‘t take some actions to make sure that it is protected, and the choices are not easy. 

But, also, I must say, Chris, dealing with the Social Security problems and solutions is a lot easier than dealing with Medicare.  There‘s not nearly as many moving parts.  And—but I think we can show the older generation that they‘re going to be fine.  The question is, will my daughter and son and their children believe that Social Security is going to be there for them or that it is going to be worth having? 

Again, my mother worked all her life, until she was 75, taught school, kept books, all that.  And yet she can‘t live on the Social Security that comes into to her each month.  If she had been able to have a personal savings account, she would have had more that she could rely on now in her retirement years. 

MATTHEWS:  What about the president‘s plan to reduce the benefits over time by basing them on cost of living, rather than on wages?  I remember back, in ‘86, Senator—I‘m sure you do—all those senators that lost their seats because President Reagan was simply going to adjust the colon that one year. 

LOTT:  Hey, Chris, do you remember my role in that?  I was one of the one in the House that went to the White House and said I know the Senate Republicans had the courage to do this, but we are not going to do it in the House.  We shouldn‘t do it. 

MATTHEWS:  I wonder why.

(LAUGHTER)

(CROSSTALK)

MATTHEWS:  You had to run that year. 

(LAUGHTER)

LOTT:  Again, Joe Scarborough will know what I‘m talking about. 

Look, the time is different.  We don‘t have as much time.  We‘re going to have a problem if we don‘t deal with this.  The demographics are different.  And here‘s the thing about this, this honest cost of living issue.  That is the point.  People are getting benefits based on something more than inflation, more than cost of living. 

MATTHEWS:  Right. 

LOTT:  It is not an honest CPI.  President Bill Clinton and I used to talk about that and Senator Pat Moynihan.  We all agreed that if we could just fix and make—have an honest CPI, that would solve 90 percent of the problems with Social Security, just doing that. 

(CROSSTALK)

MATTHEWS:  But how do you tell somebody who is 80 years old, like your mother, that she‘s getting too much? 

LOTT:  But she‘s really not.  The problem is, it is going to continue to go up every year for the next 10, 20, 30 years.  And that line goes like that.  If we could just make it honest and more accurate, we would lower it enough where there would not be this tremendous shortfall that we‘re looking at in 2018 or 2020 or 2040, whatever you say.

It is about an honest and fair benefit, because people are going to be getting in 20, 30 years more than they‘re entitled to. 

MATTHEWS:  Can the president down on your vote, Senator? 

LOTT:  You know, Chris, again, again, as Joe will tell you, I‘m in the Senate. 

(LAUGHTER)

LOTT:  I‘m in politics.

It depends on what the final product is.  But let me answer you point blank.  This time, yes.  Twice in my career, I‘ve helped to shoot it down.  This time, we‘ve got to do it and we can do it.  And, yes, he‘ll have my vote.  But we have got to have a little flexibility so that we can get enough of us together to do it in a bipartisan and in a correct way. 

MATTHEWS:  Thank you very much, Senator Trent Lott of Mississippi.  The senator made a decision tonight.

(LAUGHTER)

MATTHEWS:  We‘ll be right back with the panel in a moment.

And, later, Senator John McCain, we‘ll see if he wants to make a decision tonight. 

You‘re watching HARDBALL‘s State of the Union coverage only on MSNBC. 

(BEGIN VIDEO CLIP)

LYNDON BAINES JOHNSON, PRESIDENT OF THE UNITED STATES:  We‘re only at the beginning of the road to the great society. 

RICHARD NIXON, PRESIDENT OF THE UNITED STATES:  The ‘70s will be a time of new beginnings, a time of exploring both on the Earth and in the heavens. 

JIMMY CARTER, PRESIDENT OF THE UNITED STATES:  The 1980s have been born in turmoil, strife and change. 

GEORGE H.W. BUSH, PRESIDENT OF THE UNITED STATES:  We are Americans.  We are the nation that believes in the future. 

CLINTON:  Let us strengthen our nation for the 21st century. 

(APPLAUSE)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back. 

Let‘s go to David Gregory, who is at the White House. 

David, we just heard one senator, Trent Lott, come out and say he‘s going to vote for the president‘s Social Security plan.  He‘s got one. 

GREGORY:  Yes.  But it took him a while. 

(LAUGHTER)

GREGORY:  I think this is fascinating.  I think you can spend the next months getting every politician on your program to make a commitment. 

And it just shows you that every—Republican or Democrat, even the Republicans have to call their parents first and say, look, this is what we‘re trying to do.  Is this going to pass your test?  Even if they want to talk to younger workers, they have to talk to older Americans first to get this through.  And it goes to the point of what the president is trying to do tonight, give Republicans some political cover. 

There‘s one big idea he wants.  That‘s personal accounts.  But he wants to give them room to maneuver, and like Senator Lott said, give us some flexibility.  That‘s what Republicans need.  Democrats may need a lot more than that, even. 

MATTHEWS:  You know, you have to ask, Joe, I will give you two pictures, the campus hangout cafeteria and the community center where the older people are hanging out.  Where are they talking about Social Security this week?

(LAUGHTER)

SCARBOROUGH:  Well, again, and the seniors are going to vote. 

But I will tell you this.  One thing that the president can do.  And what I am sure he will do is, he‘ll talk about what happened a couple days ago.  And he‘ll say, listen, I took on the world.  The media just absolutely brutalized me.  “The New York Times” editorial page tour me from limb to limb.  Everybody said I was wrong.  They called me a radical. 

But, listen, I didn‘t care what they said.  I knew what was right for the people of Iraq, for the Middle East, for the world.  And I don‘t do what is politically popular.  I do what‘s right.  And it is the same thing with Social Security.  I would transfer what happened over in Iraq, if—because let me tell you something.  You can find few instances in modern American history where a political leader was more vilified and where more people were wrong about something than the elections this past Sunday. 

MATTHEWS:  Right.  Right. 

SCARBOROUGH:  George Bush was an island unto himself and people respect that political courage. 

MATTHEWS:  Howard.

FINEMAN:  Yes. 

The Democrats are going to say, don‘t be radical with this.  It is fine if you want to talk about sweeping change over there, just the Democrats‘ view. 

INGRAHAM:  Oh, yes.

FINEMAN:  Don‘t talk about sweeping change here because you‘re talking about your parents.  You‘re talking about what they view as a sacred system.  They‘re going to talk again about this $1.5 trillion siphoned out of the system as they see it.  And they refuse to call it personal accounts.  For them, it is always private accounts.  There‘s actually a war within a war. 

MATTHEWS:  I wonder why that is so bad.

FINEMAN:  There‘s a war within a war here going on. 

MATTHEWS:  Why does private sound so bad? 

FINEMAN:  Well, that‘s very interesting.  I think, to Republicans, it doesn‘t necessarily sound bad, especially since George Bush is talking about an ownership society. 

MATTHEWS:  Frank Luntz taught us...

(CROSSTALK)

MATTHEWS:  Let‘s go to Laura.  Give Laura a chance.  She‘s got to leave in a few minutes.

(CROSSTALK)

FINEMAN:  The words matter.  The words matter. 

MATTHEWS:  Laura, what do you think about this whole push on Social Security?  Is it a risky thing?  Is he going to pull it down?  Say, in two months, is he going to say, enough already; I tried; I can see you don‘t like this; I am not going to push any further?

INGRAHAM:  I think that people underestimate President Bush at their own peril.  I think people underestimated Bill Clinton at their own peril.  And I think you‘re seeing the same thing with this. 

The doubters were out in full force—Chris, you‘re chief among them—about the war in Iraq, about whether democracy is possible in the Middle East.  Well, the jury is still out.  We‘ll see. 

MATTHEWS:  Right. 

INGRAHAM:  But, on this, I wouldn‘t be so quick to apply the old political dynamics to President Bush maneuvering on this field.  I think it is a different game.  I think it is a different Congress.  And I should hope we can count on Trent Lott.  If we couldn‘t count on Trent Lott, then I think it would be a bad thing. 

(LAUGHTER)

(CROSSTALK)

SCARBOROUGH:  He took a while.

MATTHEWS:  I think the difference here between Iraq and this is that, in this case, the people who are voting are in Iraq.

INGRAHAM:  Which is harder?

MATTHEWS:  Social Security, it is their own personal circumstance they‘re talking about.  And they may admire the president, but they still look to their own interests, people do.

SCARBOROUGH:  Right.  But if people try to scare them with random facts, he can do a Ronald Reagan and say, there they go again. 

(CROSSTALK)

INGRAHAM:  But, Joe, the thing is, is what wasn‘t done on Medicare...

MATTHEWS:  We have got to go. 

INGRAHAM:  What wasn‘t done on Medicare, it wasn‘t packaged as a populist reform. 

MATTHEWS:  Right.  Right. 

(CROSSTALK)

INGRAHAM:  This has to be populist.

MATTHEWS:  Joe and I and a lot of us have been there so many times before.  There‘s a predictability to some of these.  But maybe you‘re all right.  Maybe the world has changed. 

I want to thank Laura Ingraham again—you‘re always welcome here—for being with us.  I love your radio show. 

INGRAHAM:  Thank you. 

MATTHEWS:  I listen to it every day on the way to work. 

And the rest of us will be here later on.  The grownups will stay here tonight. 

INGRAHAM:  Oh, thanks.

(LAUGHTER)

MATTHEWS:  And when we come back, Senator John McCain. 

You‘re watching HARDBALL‘s State of the Union coverage on MSNBC. 

(COMMERCIAL BREAK)

(NEWS BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

President Bush is expected to lay out his plan to reform Social Security.  Already, it is shaping up to be the most divisive part of his agenda, the biggest, in fact, trouble he may be facing in his second term. 

Senator John McCain has long called for an end to partisan politics. 

So, how does he do it tonight, Senator, marry nonpartisan politics with a very dramatic call for change? 

SEN. JOHN MCCAIN ®, ARIZONA:  Well, I think he is going to try to appeal to the best interests of the country.  I think he‘s going to point out that it is our money that goes in the form of our Social Security taxes and we ought to have some control over it and that this is the pillar of his proposal and that we are in a crisis situation. 

In other words, we can wait until 2018, when the Social Security system starts running the other way.  But then, in 2040 -- are we supposed to wait until 2042, when it has got zero money in it?  In other words, I think he‘s going to convey a certain sense of urgency and plus make a strong pitch that it is your money that you‘re paying in taxes. 

And, also, he‘s going to have to tell the seniors that we‘re not going to in any way tamper with their Social Security system.  I think that is going to be a very important part of the message. 

MATTHEWS:  I think John Kenneth Galbraith, the liberal economist, once said we‘re all dead in the long run.  Or it may have been John Maynard Keynes.  I‘m not sure which.  How do you tell?  Well, it was a liberal.  That‘s for sure. 

How do you tell people that have to face the next 20 or 30 years of their life that they should sacrifice that in the interests of a long-term reform? 

MCCAIN:  Well, I hope that the argument is shaped that, look, we need to reform the system.  It is not a matter of whether.  It is a matter of when, that it is in a crisis situation and we‘re going to protect present retirees.  We‘re going to give you an opportunity to invest your own tax dollars that are taken out of your paycheck.  And we‘re going to save the system. 

But, look, this is a tough sell.  It is going to be a tough go.  We‘re going to have debate all over the country.  The AARP is lined up against it.  Never underestimate the AARP. 

MATTHEWS:  Right. 

MCCAIN:  So, we may be in for an interesting battle. 

MATTHEWS:  There‘s two parts to the president‘s proposal.  One calls for allowing people to have personal accounts and to take about two points out of that 6.2 we pay in payroll taxes and devote that to a personal account, which, over time, would give you an actual amount of money that you own at retirement. 

MCCAIN:  Right. 

MATTHEWS:  But the other part calls for a gradual—or a shift from the benefit basis we have now, which is based upon wage rates around the country, to cost or price rates around the country.  That would call for a gradual reduction in the real value of your check over the next 20 or 30 years.  Is that second part harder to sell? 

MCCAIN:  I think it is very hard to sell.  And, frankly, I haven‘t seen all the details.  There‘s a number of proposals floating around out there. 

And the president, in his usual fashion, which is not unique to him, I think is not going to be real specific, because we‘re going to have to see a variety of proposals and try to find out what is best.  But I think he is going to lay out the principles. 

MATTHEWS:  Senator Trent Lott was just on HARDBALL.  And he committed to voting for the Bush plan when it comes out.  Can the president count on you, John McCain? 

(LAUGHTER)

MCCAIN:  Look, I haven‘t seen the details of it.  And I haven‘t heard it.  But I believe in a private savings account.  I believe the system has to be fixed.  I think a lot has to be on the table.

You once were associated with one of the great Democratic leaders in the history . And that was Tip O‘Neill. 

MATTHEWS:  Right. 

MCCAIN:  I‘ll never forget Tip O‘Neill, Ronald Reagan in the Rose Garden, arms around each other.  That was a stretch for Ronald Reagan, you know.  And they said we‘re going to save Social Security together.  And they did for a significant period of time.  And I would hope that we could generate some feeling of bipartisanship on this issue, which is so far largely absent. 

MATTHEWS:  Let me talk about the other two fronts of concern.  One is Iraq.  What is next, do you think, for the president in Iraq? 

MCCAIN:  Beefing up the military and the police to the point where they can assume more and more responsibilities as rapidly as possible from the American military, the American military withdraws into enclaves or even begins plans for withdrawal. 

I don‘t mean a timetable, but begins to allow the Iraqi people to protect themselves with their own military and police.  We‘ve changed the dynamics with this election.  Instead of it being insurgents vs. U.S., it is insurgents vs. the Iraqi government.  In this new dynamic, democracy wins, I believe.  But it is going to be very, very tough and long and hard.  And we should not be too euphoric. 

MATTHEWS:  How far do you think this president is willing to go to keep Iran next door to Iraq from going nuclear? 

MCCAIN:  Look, the reality is, we‘re tied up in Iraq, as we know.  We would have to do a real good job of convincing the American people of the threat, particularly since the weapons of mass destruction were not there, as we had believed they were. 

But you can‘t rule out, you cannot rule out a military option of a nuclear armed and equipped Iran.  I mean, you just simply can‘t.  But it is incumbent upon us, the Europeans, to work together, go to the United Nations, get sanctions, do whatever we can.  But don‘t rule out the military option, but recognize it is very difficult. 

And Israel plays in this in some respects, because it would be viewed by the Israelis, very appropriately, as a direct threat to Israel. 

MATTHEWS:  Well, the president has said, or his people have said, if we don‘t act, maybe Israel will act.  Where does that leave us?  Should we act before Israel or let Israel do the dirty work if it has to be done? 

MCCAIN:  Well, first of all, it‘s threat to Israel, but it‘s a threat to the world. 

I wouldn‘t want the Israelis to take up that burden.  I think, look we‘ve got a lot of things that can be done and a lot that needs to be done before we get—make down specific plans for military action.  I think the Iranians recognize they are running some risk here.  But, remember, this is a very oppressive, repressive government that has taken away a lot of the gains that the young students had gained over the past couple years. 

And it is a very dangerous situation.  But I don‘t think military action is imminent.  I think there‘s a lot of options to explore first, to say the least. 

MATTHEWS:  OK, it was great.  Thanks for coming on again tonight, Senator John McCain of Arizona. 

When we return, what are the Democrats up to tonight?  Plus, we‘re going to talk about President Bush‘s second-term agenda and what he‘ll be likely to accomplish at the end of this term. 

(BEGIN VIDEO CLIP)

RONALD REAGAN, PRESIDENT OF THE UNITED STATES:  President Washington began this tradition in 1790, after reminding the nation that the destiny of self-government and the preservation of the sacred fire of liberty is finally staked on the experiment entrusted to the hands of the American people. 

For our friends in the press who place a high premium on accuracy, let me say, I did not actually hear George Washington say that. 

(LAUGHTER)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(NEWS BREAK) 

MATTHEWS:  When the president concludes the State of the Union address tonight, the House and Senate Democratic leaders will both have a response to the speech. 

Democratic strategist Hilary Rosen joins us now, along with actor and activist Ron Silver, who is supporting President Bush these days. 

Ron, I have to ask you, what brings to you Capitol Hill? 

RON SILVER, ACTOR:  I was in London doing a film during the inauguration, and I missed the inauguration.  And I was pretty frustrated.  I missed the parties.  I missed the president‘s speech.  So I‘m here tonight.

MATTHEWS:  Will it be as celebratory as it was on the 20th of January? 

SILVER:  Yes, I think it is.  I think that speech he gave on the 20th was pretty significant. 

And one of the reasons it was significant—and I‘m sure you‘ve talked about this a lot—is that the president merged what were ethical values that we always espouse with our national interests.  And I think he laid down a marker that is going to become institutionalized and probably part of our policy for a long time to come.  So I‘m looking forward to the same thing tonight.  I think we‘re going to hear a lot about domestic stuff, personal Social Security accounts, things like that. 

But I also think we‘ll get a good dose of foreign policy and grand visions that this president is pretty successful at laying down.  And one thing we found out is, he says what he means.  He means what he says.  And so far, he‘s been able to accomplish what he said he was going to. 

MATTHEWS:  Ron, he‘s made it clear in the past in that great speech, the State of the Union of several years back, in 2002, he was going to do something about the axis of evil.  And he has certainly done something about Iraq.  Saddam Hussein is gone.  There‘s been elections. 

But he also warned about Iran and its nuclear program, I believe.  Do you have a sense that he‘s going to move on Iran? 

SILVER:  Well, I don‘t know.  But I take this man at his word. 

When he was asked, will you allow Iran to develop nuclear weapons, he said no.  And I kind of would pay attention to his words.  I don‘t know what that means in terms of policy, how far diplomacy will play out.  But whether or not the Europeans are successful in this regard, I‘m uncertain at this point.  But I don‘t think he will allow Iran to get to that stage. 

MATTHEWS:  Do you think we should attack Iran to remove their facilities for creating nuclear weapons? 

SILVER:  At the moment, no. 

MATTHEWS:  OK, let me go to Hilary. 

Thank you.  Good to see you.

Let me go to Hilary Rosen right now for Democratic input here.

Hilary, let me ask you about this Social Security question.  Do you think the president can use his prestige, as Ron suggested, from the very successful elections in Iraq this Sunday to win the case for Social Security tonight? 

HILARY ROSEN, DEMOCRATIC STRATEGIST:  No.  I don‘t. 

I think that what the inauguration was about, what the elections were about, that was what was happening outside of America.  Tonight is about how people‘s lives are doing right here in America.  And I don‘t think the Democrats or most Americans are going to just say, OK, Mr. President, we‘ll bet on the common and trust that the money will there and that we can count on private market-based savings accounts. 

This president has not provided a social safety net, has not provided in the domestic area the things he has said he would.  When he said he was going to fully fund AIDS, he didn‘t spend the money. 

MATTHEWS:  Right. 

ROSEN:  When he said he was going to fully fund education, they didn‘t spend the money.  When they said they were going to give seniors a full prescription drug benefit, they gave a significant amount of the money to the drug companies instead. 

I think Democrats and most American are going to say, we want to see where the real money is here.  You‘ve got to provide guarantees that we are not going to take chances on this important program. 

MATTHEWS:  What‘s the Democrat‘s plan for fixing Social Security? 

ROSEN:  Well, I think the Democrats are going to look at the whole of American savings and pensions and security nets. 

This is not just about creating a private account that Wall Street will help you manage.  Most people are looking at a series of things they have to do for savings.  That means making sure their corporations don‘t raid their pension accounts. 

MATTHEWS:  Right. 

ROSEN:  When they take money...

(CROSSTALK)

ROSEN:  ... CEO‘s money.

MATTHEWS:  Let‘s stick to Social Security.  There‘s only two ways to fix Social Security, increase the money that goes in the system or reduce the money coming out of system.  Which would the Democrats do? 

ROSEN:  Well, I think that the Democrats—look, I think they‘re going to be open to real options.  But I think mostly they don‘t see the urgency in taking money away from people who need the benefit and what they would rather do is look at the whole of how people‘s lives are on the health care side, on the savings side. 

(CROSSTALK)

MATTHEWS:  OK.  Is that the Democratic message tonight?  We should feel confident about the future of Social Security as it is? 

ROSEN:  I think the Democratic message is, right now, you‘re going to make the problem worse, Mr. President.  You have to prove to us that you‘re going to make it better. 

MATTHEWS:  Let me ask you, is the Democratic Party at all chastened by the success of the elections in Iraq to begin to think, maybe the president is right about his policy toward Iraq? 

ROSEN:  Well, as you know, the Democrats were deeply divided over Iraq.  So, I certainly was opposed to going to war.  I think the elections last week were great for the Iraqis.

But I think that the cost overall nationally for the decisions we make wasn‘t worth it.  And I think that people are going to continue to be divided.  Mostly, Democrats need to hold the president accountable on reconstruction money and on sensible pullouts over time. 

MATTHEWS:  Great to have you, Hilary Rosen, once again, Democratic activist, and Ron Silver, increasingly visible as the president‘s spokesman. 

(LAUGHTER)

MATTHEWS:  Anyway, the State of the Union is set to begin in just over an hour.  We‘ll be right back with the panel with some predictions about what the president will do and what he‘ll be able to actually accomplish from tonight‘s measure.

You‘re watching HARDBALL only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with our panel. 

Let me go to David Gregory right now and see what he knows already. 

You know, the State of the Union address has been a big deal for this president in particular.  I think back on 2002 with the axis of evil speech, which basically laid the groundwork for the war with Iraq.  I think about the claim that there were nuclear weapons moving to Iraq in 2003, the famous 16 words about that that had to be reclaimed later. 

Do you have a sense there‘s something as sharp-edged as those words tonight, David? 

GREGORY:  I don‘t think so. 

I think there will be some sharp edges when it comes to looking ahead to Iraq and trying to steel the country to sort of stay committed even after surprisingly successful elections in Iraq.  I do think he‘s going to have some sharp language for Iran and Syria to keep the pressure up there. 

But I do think, particularly because after the inaugural, there‘s going to be really a laser-like focus on the domestic agenda and Social Security.  I think it is the first time that he‘s going to block out so much time for a major domestic issue here, really putting some of the others in the shadow. 

MATTHEWS:  I was reading some of the bloggers tonight on the hawkish side of the Middle East.  And one of them was pushing the argument, the press has—quote—“to live up to his commitments with regard to preventing Iran from becoming a nuclear power.” 

Does he feel that pressure to say something hard?  And, if so, will that carry some dangers? 

GREGORY:  I think it does carry danger.  And I don‘t think he is prepared to be too hard about that. 

This administration is committed, for now at least, to letting the Europeans take the lead on trying to negotiate a solution.  There is not a lot of leverage here for the United States.  And that comes from the president himself.  He has said that we don‘t have much leverage with the Iranians right now.  The vice president is talking about this in a pretty hawkish way, saying that the Israelis may sort of be galvanized and emboldened to act.    

I think he wants to stay tough, but I think he can‘t overpromise here.  And I don‘t even think he can match the axis of evil talk about Iran right now, especially as he is trying to work with Europe to be out front to get a solution.

MATTHEWS:  Let me go to Joe. 

The president does have allies in this war against terrorism.  Some are to his right.  Does he feel that pressure, do you think, to be equally tough tonight about Iran as he‘s been with regard to Iraq? 

SCARBOROUGH:  John McCain really said it all.  We‘re stretched thin, just like David was talking about.  The president know he‘s stretched thin.  We‘re in Iraq.  They‘re talking about Israel, possibly waving the bloody flag of Israel, doing what they did to Iran back in 1981, ‘82.

MATTHEWS:  So they did it successfully once. 

SCARBOROUGH:  They did it successfully.

But they‘re not going to allow that again.  We just got, I think, historic news that Egypt is now going to hold a summit between Israel and the Palestinian leader, the new Palestinian leader.  The president doesn‘t want to see that go up in smoke with an attack on an Arab country.  He also knows something else.  History is on his side; 70 percent of the Iranians are young.  They‘re pro-Western.  They hate the theocracy that‘s there. 

He believes this democratic revolution is going to spread across the border.  They will threaten the mullahs in Iran, but they will not move. 

MATTHEWS:  Is the issue whether Iran goes modern and gets a nuclear weapon or whether Iran stays mullah-driven?  Does it stay dangerous?  I can imagine—I‘ll just say this.  I can imagine—I don‘t worry about Israel having a nuclear weapon.  I don‘t worry about Indiana having one.

I would worry a lot about perhaps Pakistan or Iran under the current governments. 

FINEMAN:  I think you have reason to be worried.  But I don‘t think the president is going to want to raise the worry level in this speech tonight.  He is going to rather want to go off the roll call of newly democratic states or voting states, Afghanistan, Palestine, might even mention Turkey again, which is a democracy...

(CROSSTALK)

MATTHEWS:  Applause lines, all, right?

FINEMAN:  Applause lines, all.  He wants to lower the temperature now.  It is still boiling enough in Iraq.  And he knows that. 

MATTHEWS:  I want to ask you one thing. 

Do you expect, David, tonight—I love the visuals of these State of the Unions.  It‘s which side of the aisle applauds.  Do you think the president is going to put the pressure on the Democratic side, the right side of the aisle as we face it, to applaud his successes in Iraq?

GREGORY:  Oh, I think so. 

This president feels vindicated.  Joe was talking about this earlier.  Nobody thought these elections in Iraq were going to go well.  He stuck to the timetable.  And he‘s going to wave that flag.  And he can do it in Afghanistan and in the Palestinian territories.  These are, by all accounts, major successes.  And I think he does want to put the pressure on Democrats to say, are you really against this? 

He understands as well as anybody that, in all those countries I just mentioned, the Palestinian territories, Afghanistan and Iraq, that we are far from finished and it could go all go south.  But there are these moments that are difficult to deny successes, when people risk their own lives to vote. 

MATTHEWS:  Right.  Well said. 

And I think you‘re going to see tonight some interesting theatrics. 

The Republican side, Joe, will stand up to applaud.

SCARBOROUGH:  Immediately.

(CROSSTALK)

MATTHEWS:  And those Democrats are going to have to decide whether they stand up or not.  Applauding lightly ain‘t going to work.

Thank you, Joe Scarborough, Howard Fineman, David Gregory.

I‘ll be right back in 30 minutes, about 30 minutes, as we continue our preview of the State of the Union here on MSNBC.  And then, in one hour, at 9:00 Eastern, President Bush will address Congress and the country.

Right now, it‘s time for the “COUNTDOWN” with Keith Olbermann.

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

END   

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