Guests: Robert Reich, Kate O’Beirne, Eugene Robinson, Al Hubbard
CHRIS MATTHEWS, HOST: The Dow regains ground but is Bush’s economy on solid ground? Let’s play HARDBALL.
Good evening. I’m Chris Matthews and welcome to HARDBALL. Today the stock market rebounded slightly after Tuesday’s drop of over 400 points. Most analysts said the collapse was triggered by a plunge in Chinese stocks, but why did a sell-off in Shanghai cause a drop in U.S. stocks? Is the new global economy putting the American economy at risk? We’ll talk to Jim Cramer, the host of CNBC’s “MAD MONEY,” later in the show.
Plus, did Bush’s policies contribute to yesterday’s drop? Did fears of a recession play on the minds of traders? On Monday, former Fed Chairman Alan Greenspan warned a recession could be coming. And today, Federal Reserve Chairman Ben Bernanke warned Congress about the federal deficit, but reassured investors that the economy was said to grow moderately.
We begin with MSNBC political analyst Pat Buchanan and former Clinton Labor Secretary Robert Reich. They’re going to agree on nothing.
Secretary Reich, the stock market regained about 10 percent of yesterday losses today. Should we still be worried about a further collapse here?
ROBERT REICH, FORMER LABOR SECRETARY: Yes, Chris, we should. Not a collapse but certainly a major slowdown because there is what economists call excess liquidity, translated into English, it means there is too much cash sloshing around, which means that a lot of investors, everybody from hedge funs to the Bank of Japan and Bank of China, they’ve been putting too much money into too risky developments.
It’s like a big house of cards. And we saw a little bit of that house of cards tremble yesterday.
MATTHEWS: You mean people are not investing or investing too much?
REICH: They’re investing too much in risky investments. In other words, look at our subprime mortgage market. You know, you have a lot of banks and mortgage lenders who are pushing out money because they have money. They have got to push the money out and they’ve been lending money to people who probably are not very good risks. A lot of poor people who should not necessarily get the money they’re getting because when interest rates go up, they won’t be able to pay back the—what they have to pay on the mortgage. And that means bank foreclosures.
Foreclosures, Chris, just look at foreclosures. Foreclosures were up 42 percent last year over the year before. So the whole market, whether you’re talking about China or the United States, there is just too much money chasing too much money and that means a lot of speculative bubbles are developing.
MATTHEWS: OK. Let me go to you, Pat. Let me talk about the Chinese thing. I don’t know how you say “recession” in Chinese, but we’re learning. We used to an autonomous economy, it moved up and down, depending on domestic realities in this country. Now we find out that what happens in Shanghai, a 9-point drop in the Shanghai market, brings about a 3.5-point drop here.
All of a sudden, the United States finds itself to be, as we say in economics, a function of some other reality. How does it feel?
PAT BUCHANAN, MSNBC POLITICAL ANALYST: Well, the United States is embedded in the global economy. You are right. And you make the.
MATTHEWS: You hate that, right?
BUCHANAN: Well, I think it gives us a real dependency on a lot of foreign countries that we didn’t use to have. No, I don’t like that. With regard to the Chinese, they’re growing at about 10 percent a year, but everybody—a lot of people felt the Chinese market was sort of soft.
But I will say this, about the money that Robert Reich is talking about, the Chinese have a trillion dollars in reserves, the Japanese about $700 billion or $800 billion. There are dollars all over the world. We pour out $2.4 billion a day in a current account deficit.
One of these days the dollar is going to go down and I think there is going to be hell to pay.
MATTHEWS: Well, right now.
REICH: Pat, let me say, one of these days the dollar is going down?
The dollar is already going down.
BUCHANAN: Oh, against the euro.
REICH: . and we are dependent—whether you like it or not, Pat, we are dependent, the Chinese are sending us over a billion dollars a day to support us, keep us in the manner to which we’ve become accustomed.
MATTHEWS: Well, explain that—explain that transaction, Bob. We know we’ve been running big deficits in this country. We know we have been borrowing from abroad, primarily I guess from the Far East. How does that affect our stock market, our economy to be so dependent on foreign debt from China?
REICH: Well, it affects us in every way possible, Chris. We are living high on the hog. I mean, the average American doesn’t feel like he or shoe is living high on the hog, but as a country, given the budget deficit, given corporate spending, given what hedge funds are doing, given average people and the indebtedness of the average family, we are living beyond our means and that means that we have to borrow from abroad.
We are borrowing from Asia about $2 billion a day, about half of that obviously is coming from China. Because, as Pat said, there is so much money over there and there are a lot of petrodollars, a lot of oil dollars that are also circulating.
MATTHEWS: But, Bob, that’s another way of saying that this president and Congress together, a Republican Congress until recently, have been writing hot checks of about $2 billion a day ever since they got in office. And writing those hot checks, using the phrase that Lloyd Bentsen once used, is that bad for the economy, Pat?
BUCHANAN: This is terrible for the economy. And with due respect to Mr. Reich, Mr. Clinton and Mr. Bush are largely responsible. Let me give you one example. I mean, with China, we ran a $235 billion trade deficit with China last year, $88 billion with Japan, $60 billion with Mexico.
Robert Reich and I debated NAFTA in 1993 and I said, we will have trade deficits if it passes. We have had trade deficits soaring every year.
MATTHEWS: Explain the deficits. It means that they—we export to them more than they import to us?
BUCHANAN: Exactly. Five hundred billion dollars in total, Chris, since ‘93. Let me tell you, last year Mexico exported more than 900,000 cars and trucks to the United States. We exported fewer than 600,000.
MATTHEWS: OK. What happens to that.
BUCHANAN: Six hundred thousand to the whole world.
MATTHEWS: I just need this economics lesson for everybody watching. What happens, both of you, when the United States sells a lot less to China than China sells to us? That dollar difference of X many hundreds of billion dollars a year, where does that money go to?
REICH: Chris, what eventually—the money is circulated in all sorts of ways in the United States, but eventually what happens, and is already starting to happen, is the dollar starts to decline relative to foreign currencies because the dollar is basically our IOU.
And everybody else in the world looks at the dollar and says, now wait a minute, that IOU is not very reliable any more because it has so much debt behind it. And that gradually the foreign trader of the world is going to be switching out of dollars and into yen or into euros. The dollars are just not going to be worth very much because...
BUCHANAN: All right. We have got.
MATTHEWS: So what happens—what does it—what does the calamity look like, Bob, among those lines? It is not happening now, we have a.
REICH: It is not—no. Chris, it’s not going to be a calamity. It is not going to be a calamity because China and Japan and others that are holding dollars, they don’t want to be holding worthless pieces of currency. So they—everybody wants, everybody, the U.S. Treasury and the Fed and China, everybody wants a gradual decline of the dollar, gradual, a peaceful decline of the dollar.
BUCHANAN: Robert, the point is, last year, we ran an $880 billion current account deficit, 6.8 percent of GDP. Historically countries that have done that are in decline. We are pouring out all of these dollars. The value is going to go down. You say, hopefully it’s going down slowly but the trade deficit and the current account deficit are rising and rising and rising and there is a real possibility, in my judgment, Chris, you have a sudden collapse of the American dollar, interest rates would go up and you have got a recession in the United States.
MATTHEWS: You are against this large reliance on trade in our export sector. Bob, are you—still think we’re a good country to be a trading country? Are we better off with a free trade attitude?
REICH: Oh, absolutely, Chris. We would be—if we did what Pat Buchanan wants to do and secede from the rest of the world, we would all be much poorer. Now look at—I’m not saying everything is right. I think that we have got to reform our trade regime. We ought to have labor and environmental standards and trade treaties. I think that’s the way Congress is going.
I think we’ve got to do better in terms of exports. We have got to become—continue to become more productive. We have got to invest in education and make sure our people have the kind of productivity that they need to be major players in the world economy.
BUCHANAN: Bob, what are you talking about? These are cliches. Did you see the test scores of American kids? The grades are higher and the test scores are lower. The truth is, look, the trade—this year, the trade authority the president called “fast track authority,” you know, he cuts a deal, Congress, yes or no, that’s going to be denied to him.
It’s going to be the big test this year. Democrats are going to fight to deny it to him. I will tell you who they are trying to buy-up—or they are trying to get the support of, Charlie Rangel and the Democrats, the boys in Washington. You have got to give us fast track if you.
REICH: Well, wait a minute, wait a minute, Pat.
BUCHANAN: These deals are killing the average American.
REICH: But I’m not, wait, wait, wait, Pat, do you think that fast track trade authority ought to be denied the president?
BUCHANAN: Yes, I do.
REICH: Well, I disagree with you.
BUCHANAN: Well, why—look, why should the president—when you have got these horrible numbers, the worst trade record in history, why should we give him a blank check to start cutting trade deals?
REICH: No, I’m not saying blank check. I think—what we want to do is as a price for fast track trade authority, we want to put into every trade deal labor and environmental standards. We say to other trading nations.
BUCHANAN: But that affects foreigners! That doesn’t.
REICH: Wait a minute. For example.
BUCHANAN: . affect Americans.
REICH: . we say to other traders—trading nations, if we’re going to trade with you, you have to have a minimum wage that’s half your median wage.
MATTHEWS: But the fact is that our American workers in a free trade environment are competing with Chinese who work for a lot less per hour.
BUCHANAN: And we lost.
MATTHEWS: And that’s why the Vietnamese economy is doing so well. Bob, put it all together. We have a president who believes in red ink as a fiscal policy. He believes that big tax cuts and big deficits are good for the economy. He may be right. Until a couple of days he certainly looked right. And he also believes in free trade. He agrees—the opposite, he agrees more with you than with Pat. Free trade and big deficits, is that a road map to economic stability or to disaster?
REICH: Well, it is a road map to stability if we can get to the point where we increase exports where the Chinese revalue their currency so they are more—we are playing on an even playing field. We invest in our people, which is what, you know, Bill Clinton has been saying for 20 years.
We invest in the most important product we have, which is our people’s capacity to be productive. And at the same time we create some laws and rules that make the level playing field a little bit more level.
MATTHEWS: Well, we live in a world of—we live in the world that you described.
REICH: Now listen, we can’t secede from the rest of the world, Pat, we can’t do that.
BUCHANAN: We lost 3 million..
MATTHEWS: Well, we live in this world. We will be back with Pat Buchanan and Robert Reich right after this.
MATTHEWS: We are back with Pat Buchanan and former Secretary of Labor Robert Reich.
Bob, I have to ask you this about the economics of this—or rather, the politics of the economics. We know we took a big shot on the stock market yesterday. We got a little comeback today, about 10 percent. But we are talking about a 400-point drop in the Dow in one day. Does this shake confidence in the Bush economic program?
REICH: Oh, I think undoubtedly, Chris, because that Bush economic program is basically a variant on trickle-down economics, supply side economics. Big tax breaks to the rich. Don’t worry about deficits very much. Let the rich continue to invest and they will pull up the rest of the economy. That’s the ideology there.
But it doesn’t work because the rich, as we know, in the global economy will invest all over the world where they can get the best return. They’re not necessarily going to invest in America. And at the same time.
MATTHEWS: By the way, that is the advice you’re getting.
REICH: . you are giving people the kind of tools they need.
MATTHEWS: That is right. You are getting that advice out of the market right now, put some money in foreign, you’re right. Let me go to Pat Buchanan and analyze it right now. The economic policy of this administration is, let the good times roll, deficits fine, the important thing is cutting taxes, keeping them down. Is that strong policy, along with free trade?
BUCHANAN: Well, this—no, the free trade is a disastrous thing. But look, this really hurts the president because it hurts the president with his people, if you will, the well-to-do, who have got a lot of money in stocks and things like that.
MATTHEWS: His base, as he calls it.
BUCHANAN: That is part of his base. But the worst thing in that, is look, under Bush, 3 million manufacturing jobs, one in every six, have vanished. They have disappeared. Real wages in manufacturing have gone down 3 percent in three years. The Reagan Democrats are leaving the Republican Party. They left them in Ohio and Michigan. And Republicans will not wake up and understand that it is this insane ideology of globalization that is killing their base in this country.
MATTHEWS: The Democrats have come back into power and I think Bob doesn’t have to tell us this, we know it from other evidence that the Democrats are in an anti-trade mode roughly right now. They’re moving toward—look at the guy who won in Ohio, the new senator there. Is that going to be the new policy of the Democratic Party, more like you’re thinking?
REICH: You know, Chris.
BUCHANAN: Hold it a second, Robert. Economic patriotism is the wave of the future. The vast majority of.
MATTHEWS: How is that different than protectionism?
BUCHANAN: It is—well, there is a number of aspects to it. You can have protectionism with it. But the problem with the Democratic Party is the money in this city that bought—buys both parties is fanatically pro-free trade because all of these global corporations are moving production outside of the United States and they want free entry back in.
Big labor will be supporting and general labor, small business, will be trying to stop these trade deals but the boys who are paid by the lobbyists in town will want to give the president fast track because that’s who pays their tuition.
REICH: Can I just get a word in here. Look, Chris, we’re not going to abandon free trade, we’re not going to abandon the rest of the globe. We’re not going to abandon direct investment around the globe, that would be crazy. We would be shooting ourselves in the feet. But we can do this. We can say on all future trade treaties, there are going to be labor and environmental conditions.
MATTHEWS: But isn’t that just a way to get out of trade.
REICH: We can make sure that.
REICH: . are playing by the same rules.
BUCHANAN: How does that help Americans?
REICH: . we are.
BUCHANAN: How does that help American citizens?
MATTHEWS: . Mexico is going to have more—any pollution efforts, they’re going to pay everybody 20 bucks an hour, isn’t that just another way of saying, you are against free trade but you have got some good excuses here?
REICH: No, no, no, no. Let me go back to the example. One example, as you say to foreign nations where you have a minimum wage, that minimum wage has got to be half your median wage. It doesn’t mean your median wage has got to be as high as America’s. But as you gain growth, as you grow because of trade, you’ve got to spread the benefits of that growth to your people.
BUCHANAN: All right. Bob, what do you do when they tell you—the Chinese tell you, as they told Paulson and Bernanke and the six cabinet officers, go fly a kite and sent them home?
REICH: Well, one thing you’re not going to do, Pat, you’re not going to say to them.
BUCHANAN: You are not going to do anything.
REICH: . we don’t care, you go home. We don’t need your money. We don’t need—you know, you take your money and just put it away.
BUCHANAN: No. What you do, Bob, you tell them you have got a 20 percent tariff.
REICH: Pat, the problem is.
BUCHANAN: . on your goods until you adjust your currency.
REICH: . this is an integrated and interdependent global economy.
You can’t pretend that you, any nation can go it alone any longer.
BUCHANAN: You are talking out of.
REICH: That same mentality got us into trouble in foreign policy.
BUCHANAN: In the 1930s, look.
REICH: Go-it-alone is no longer possible.
BUCHANAN: You are talking out of an ideology. Every country in the world practices protectionism. Chinese do and they are growing at 10 percent a year.
MATTHEWS: Can we get out of the situation we’re in now, gentlemen, which is dependence on the Chinese markets? Everybody who has picked up a newspaper who is retired or facing retirement is worried that our stock market and the value of their holdings depends on what they decide in that government over in China.
They say we are going to cut the price of stock over there, we lose 3.5 percent.
BUCHANAN: Well, you—look, you can but it will take time now. It took us a long time to get embedded here. But you can, if you practice economic patriotism, economic nationalism on a slow and gradual basis to regain our position where we are no longer dependent on the whole world.
MATTHEWS: But, Robert, is there any way we can lose our.
MATTHEWS: Can we gain our independence? Can we.
REICH: I don’t know what Pat Buchanan means.
REICH: I don’t know what my good friend Pat Buchanan means by economic patriotism or economic nationalism. Now we tried that in the 1920s, Congressman Smoot and Hawley, and what happened? We had a depression. That’s not the way to go. That is absolutely the wrong way to go.
MATTHEWS: Mr. Secretary, one last question. Can you imagine any way we can get out from underneath the Chinese elephant so that every time they sneeze over there, we don’t have an economic catastrophe over here?
REICH: Well, we can demand two things. We can say, China, we want you to revalue your currency and make it reflect the real value of your economy and your exports. And number two, we want your market, your stock market, your capital markets to be much more transparent so we investors and worldwide investors can know what is going on there. Otherwise there are going to be these speculative bubbles.
MATTHEWS: As you speak, that’s being translated into Mandarin and I’m sure they are going to respond positively.
MATTHEWS: Mr. Secretary, thank you for that analysis—I mean that. Although I am sarcastic about their immediate response to what you just said. Thank you very much, former Secretary of Labor Robert Reich, who is out in Berkeley, California. And Pat Buchanan, who is here with me.
And that lively debate is the real debate over foreign trade policy. Up next, what can the U.S. do to stop the Taliban? Will putting pressure on Pakistan help?
And later, CNBC’s Jim Cramer, you’re watching HARDBALL on MSNBC.
MATTHEWS: Welcome back to HARDBALL. With the suicide bomb attack on Tuesday at the gates of the main American base in Afghanistan during a visit by Vice President Cheney, a signal to the U.S. that the Taliban and al Qaeda are resurgent. Michael Sheehan is an NBC News terrorism expert. He’s a former coordinator for counterterrorism at the U.S. State Department.
Michael, was that an assassination attempt in Afghanistan against our vice president?
MICHAEL SHEEHAN, NBC TERRORISM ANALYST: Chris, I think it was. I don’t think it was a coincidence they attacked the gate on that particular day. It was a well-timed quick operation, which shows a lot of capability by the Taliban and al Qaeda to launch a suicide terrorist on very short notice. They probably knew the vice president was there, but they weren’t good enough to really get a good shot at him.
MATTHEWS: Did they go to kill him or to scare us? In other words, apparently this suicide person, I think we’re looking at his body being removed here perhaps, got into the gate but didn’t get within three miles of the V.P. Was that a hopeless effort or was that a real attempt to really get to the V.P., to Cheney?
SHEEHAN: Probably a little bit of both. I think clearly this suicide bomber had in mind going after the vice president, although he lacked the patience and the discipline. They probably should have gone after the vice president’s motorcade, if there was one.
MATTHEWS: Right. And waited for it to pass by, yes.
SHEEHAN: Right. They might have had a better shot. So a little bit of indiscipline there, but they did—were able to pull the trigger.
MATTHEWS: Let’s talk about the big worry we have over there. America went to Afghanistan, threw the Taliban out of power. Brought in this good guy, Karzai. We still haven’t been able to find bin Laden. But we think he’s hiding somewhere in Pakistan. Is Pakistan our ally in helping to find bin Laden and in protecting us against a resurgence of the bad guys in Afghanistan?
SHEEHAN: Pakistan is definitely our ally, but a troubled ally. Pakistan has a long history of meddling with some of the wrong folks in that area. The army’s intelligence, known as the ISI, has supported the Taliban previously, prior to 9/11. They support Kashmiri separatist groups that are intertwined with al Qaeda.
So they’re playing a dangerous game in that area. Musharraf would like to control it, but it’s very difficult for him to do politically and militarily. They’re an ally but they’re in a lot of trouble in that region.
MATTHEWS: How does Musharraf go to bed at night knowing that the ISI is on the other side?
SHEEHAN: Well, when I met with him, we confronted him with that and
he assured us that the ISI was completely within his control. And I just -
we just didn’t see that on the ground. He has elements within the ISI that are embedded with the wrong types of people, that ultimately some of those groups have actually tried to assassinate him. So he has got to sort out his own.
MATTHEWS: Oh, what a life.
SHEEHAN: . components with his own military and get a control of them and move into those areas.
MATTHEWS: Everybody has troubles but imagine being Musharraf every day. I don’t understand. Let me ask about bin Laden, we used to laugh as he escaped from Tora Bora, whatever it was over there—what was the name of that place in Afghanistan he escaped from, Bora Bora?
SHEEHAN: From Tora Bora, right.
MATTHEWS: Tora Bora. And he was riding—he is six-foot-four, which is very tall for that part of the world. He is on dialysis. He has kidney troubles. He was on a burrow (ph). And we all laughed, I certainly led the laughing that he couldn’t possibly escape, he did. Where is he?
SHEEHAN: I think he’s up into the tribal areas of Pakistan, well-ensconced probably with a very small group of people. Bin Laden is not very active but the organization—his organization al Qaeda that is inspired by him and by his deputy, Zawahiri, seems to be back on track, establishing bases in the area, assembling suicide bombers and attacking. Right now.
MATTHEWS: Can they raise the kind of money they needed—a couple hundred thousand bucks to pay for 9/11, can they find the technical know-how in Europe or elsewhere to carry out a really bad attack on us at this point?
SHEEHAN: I think they can find the money, they can find the bombers, and they now—they have the camps. The ingredient that.
MATTHEWS: Do they have the contacts with the more sophisticated technical people in Europe, the people they used last time?
SHEEHAN: I don’t think they need them. What they need though is be able to move people out of those and into the United States. And post-9/11 it has been much more difficult. The 19 bombers on 9/11 came strolling straight into the United States. And al Qaeda has had difficulty operating outside of its theaters, like Iraq and Afghanistan. It remains to be scene whether they can get that capability and launch it here in the United States.
MATTHEWS: What’s to stop them from sending a hundred people into our country, they each get a different movie theater on a Friday night and blowing it up? What’s to stop them from doing that? I have never understood that?
SHEEHAN: Well, it’s difficult for them now. If you’re an al Qaeda terrorist sitting in a camp in Afghanistan, prior to 9/11, if you could speak English and had a Western passport, pretty easy to get in, as we saw Mohamed Atta.
Now it’s a lot more difficult for them. Some might try to go through Mexico, through Canada, through JFK Airport, each one has its own different challenges and they’re having a bit of difficulty.
MATTHEWS: Well, that’s good to hear. That’s the best news I have heard in five years around here. You think it is hard for the bad guys to get in this country....
SHEEHAN: It’s harder.
MATTHEWS: . because we are doing the job, and the president deserves credit for that, right?
SHEEHAN: I think it’s harder for them to get in. And I think a lot of people deserve credit.
MATTHEWS: Does somebody deserve credit for this?
MATTHEWS: Are we doing a good job?
SHEEHAN: Certainly. Well, it’s compared to being completely asleep at the switch prior to 9/11. Now we are—it’s a little bit tougher for these guys to move around internationally, as has been seen since 9/11. But they are—we are working at it.
MATTHEWS: OK. Let’s project down the road, let’s go to worst-case scenario, let’s think black Irish, you got the name and I do too. Let’s think about this black Irish worst-case scenario. Five years from now, could we possibly lose Afghanistan to the Taliban again?
SHEEHAN: Not if NATO is there. If NATO, however, wears down and loses its staying—stick-to-itiveness and departs, then Afghanistan could fall to the Taliban again.
MATTHEWS: What is the risk assessment you are putting it, at 1 percent our of 100, or what? Two percent chance it goes to the Taliban?
SHEEHAN: Oh, I would say about 10 percent. But the real problem, Chris, is....
MATTHEWS: That’s high for most people, a 10 percent chance that we lose to the bad guys.
SHEEHAN: Well, I think NATO could leave. I think NATO could leave in five years or 10 years and the Taliban could be back. But the real problem is if Taliban has a big enough sanctuary for al Qaeda to sit with impunity in major sections of Afghanistan or Pakistan, eventually they’re going to be able to launch and reach out and touch us, whether or not they have control, full control of Afghanistan or not.
MATTHEWS: Well, sir, thank you for the good news. Michael Sheehan says we’re doing a pretty good job of catching the bad guys before they get in the country. Maybe that explains why we haven’t been hit again and won’t be hit for a while. Thank you very much.
Up next, Hillary Clinton is losing ground to Barack Obama among African-Americans, like half her support in about two weeks. How bad will it get? HARDBALLers Kate O’Beirne is coming here and Gene Robinson of The Washington Post.
You are watching HARDBALL on MSNBC.
MATTHEWS: Welcome back to HARDBALL.
A new poll by “The Washington Post” and ABC News shows that black voters are abandoning Hillary Clinton to support Barack Obama. How bad is that for Clinton?
Let’s bring in the HARDBALLers. Today’s HARDBALLers are Kate O’Beirne
I just love that phrase, HARDBALL—political analyst and Washington editor of “The”—I’m sorry—Washington editor of “The National Review.” That was John McLaughlin’s old job. And Gene Robinson is a columnist for “The Washington Post” itself.
Your poll came out, sir, today. It showed that Hillary Clinton was beating, among African-Americans, Obama 60 to 20, beating him like a drum, and now he’s beating her by about 10 points. What’s happening?
EUGENE ROBINSON, “WASHINGTON POST”: Well, I thought this would happen. People...
MATTHEWS: Look at this! Look at this! Look how fast it moved!
MATTHEWS: She was beating him three to one. Now he’s up by 10 and he’s got the hot hand, it looks like.
ROBINSON: Yes, well, he—he’s getting around, and African-Americans are getting to know Barack Obama. I mean, he was...
ROBINSON: ... you know, a two-year senator from Illinois. She—
Hillary Clinton, has been around...
ROBINSON: And look, you know, it may be true, as Chris Rock said, that Bill Clinton was our first black president, but nobody every said that...
MATTHEWS: I thought it was the poetess that...
ROBINSON: It could have been.
MATTHEWS: ... the other woman, Toni Morrison.
KATE O’BEIRNE, “NATIONAL REVIEW”: Toni Morrison.
ROBINSON: Yes, I guess it was. But in any event, they never said...
MATTHEWS: Toni Morrison is correct.
ROBINSON: They never said that Hillary Clinton was our first black first lady, I mean, and—and you know, you and I were sitting here during the Coretta King funeral...
MATTHEWS: I don’t think she has the advantage he has. I’m not black, obviously...
ROBINSON: She does have...
MATTHEWS: ... but she had—he had the advantage of growing up in a black environment in the deep South.
ROBINSON: And he has this ability to speak to and really for black America that few people have, few white guys from Arkansas would have. But she doesn’t have that, so...
MATTHEWS: He’s alone in that way, isn’t he.
ROBINSON: Yes. He is. He’s quite something.
MATTHEWS: Jimmy Carter had a different kind of connection, but I mean, he strikes me as a guy that could—well, when I watched him at Mrs. King’s funeral, I just have never seen anything like it.
ROBINSON: You and I were sitting right here. It was the most amazing thing.
MATTHEWS: I have never seen anything like it.
ROBINSON: I mean, it’s the one memorable speech from that funeral.
MATTHEWS: And everybody else gave some written speech, and he said, There’s a woman in there!
ROBINSON: A woman in there.
ROBINSON: He just captured the moment...
MATTHEWS: And cut to it~!
ROBINSON: It was just amazing. It was amazing. But she didn’t do that. She spoke next, and it just went completely flat.
MATTHEWS: I hate to pass on his lifestyle and questions like that, but there are times when he sounds like Jesus in the temple. I mean, the amazing ability to transcend ethnicity—race, we call it, it’s really ethnicity—in this country and speak to us all in this amazingly primordial way. And that’s the only good thing I’ll say about him tonight.
O’BEIRNE: I think we agreed, too, when we watched that day how Hillary Clinton sort of shrunk sharing the stage with Bill Clinton.
O’BEIRNE: I think we agreed that it wasn’t good to have appeared together and have both spoken.
MATTHEWS: They say don’t go on a stage with a dog or a kid or Bill Clinton.
O’BEIRNE: He was just so much better. Look, we’re told that Barack Obama isn’t black enough. Like we’re told...
MATTHEWS: Well, that apparently isn’t true anymore...
MATTHEWS: ... that canard was worth, it’s gone now.
O’BEIRNE: Right. Well, and he’s certainly more black than Hillary Clinton is.
MATTHEWS: You know, I just watched the other night something that was really stirring—did you see it, Gene, the—this is off the track, but I was so taken by it. Oprah Winfrey is in Africa with those young women, those girls. Did you see her?
MATTHEWS: She was vetting them. And I thought—she had a girl that looked just like her, and she looked—she looked just like her, a younger version of her. She said, I’m looking at me. And that—I mean, it seems like race, you know, the ethnic connection...
MATTHEWS: ... this guy’s half African, you know?
ROBINSON: Well, yes. But one thing on Obama, he came to my hometown of Orangeburg, South Carolina, and I went down for, you know, an appearance there at Claflin (ph) College, where my mother used to be the librarian...
MATTHEWS: There’s going to be a big debate down there.
ROBINSON: Right, there’s going to be a big debate at South Carolina State, which is next door. But you know, this was in an African-American crowd. And is he black enough—that’s what all the reporters wanted to ask everybody, and people looked at them as if they were crazy. And it was not really an issue for most people. It’s interesting. His heritage is interesting. And he’s a fascinating guy. He spoke very well. He had the crowd.
MATTHEWS: Well, a guy came up to me who’s a friend of his out in—when we were out covering the Springfield announcement, that stirring day, when it was 3 below zero wind child, and he’s a friend of Obama, clearly. But he said to me, All these polls that show African-Americans voting for Hillary rather than Obama are wrong, and apparently, that he’s more right now than wrong, that the polls are beginning to show that African-Americans are lining up, like most ethnic groups would behind their champion.
ROBINSON: Yes. No, I think it’s—I think that movement probably will continue, and we’ll see what effect it has on the overall race.
MATTHEWS: What’s interesting in these races, Kate—and it’s in both the Republican Party and the Democratic Party—there’s a one, two, three attitude. There’s Hillary, one, clearly up in the 40s now on this new poll. There’s Giuliani up in the 40s. Everybody said it can’t be done. He’s up in the 40s. And the more people know he’s pro-choice, he stays up there. And then there’s the number two person, John McCain, who’s sinking a bit. Obama’s coming up. And then the third place person in both parties is a guy who’s not running, Newt Gingrich running...
ROBINSON: ... and Al Gore. Right.
MATTHEWS: What is this about the love of the phantom in both parties?
O’BEIRNE: Well, except in both cases, both Al Gore and Newt Gingrich, I mean, they tend to trail sort of in single digits as long as their candidacies are not real.
MATTHEWS: Double digits in those cases, by the way.
MATTHEWS: Middle double. I think it’s...
O’BEIRNE: They’re both well known. They both obviously enjoy broad support, you know, in their party enough to make it into low double digits in a poll. And of course, I don’t know that the public is bored with the field because they’re not paying the kind of attention we are. They’re healthier people, Chris. They have lives, unlike us. But I think...
MATTHEWS: Well, I hate to tell you or them, but if they’re not paying attention, they’re going to end up with a president they don’t even know. And it’s a good time to get to know these people while you have a call (ph) because both parties are going to have nominees this time next year probably.
O’BEIRNE: A year from now.
MATTHEWS: And you better have a role in picking those nominees or you’re going to be stuck with a choice you don’t like. And then we’re going to have the American people saying, Oh, I can’t believe those are the choices we have to make. No, they’re the choices you will have made by next year.
ROBINSON: Our polls showed a substantial increase in the number of people who say they were paying close attention to the presidential race...
MATTHEWS: I believe it.
O’BEIRNE: ... compared to—to...
MATTHEWS: We know the stakes!
ROBINSON: ... you know, four years ago.
MATTHEWS: We know...
MATTHEWS: We know that the new president can go to war or not. Some presidents will go to war, some won’t. Some will be right to go to war, some will be wrong not to. But it does matter.
O’BEIRNE: Oh, the stakes are enormous. Although I saw in polling, Gene, more people on the Democratic side are engaged early than on the Republican side.
MATTHEWS: Because want change more.
ROBINSON: Yes. That’s true...
O’BEIRNE: They want change more.
ROBINSON: ... but even on the Republican side, it’s higher than in previous cycles. I mean...
MATTHEWS: Let me go to the topic, Gene, before we get back—front page of your paper today—I’m sure “National Review” will get onto this - - the stock market. It went down over 400 points yesterday. It only came back a tenth of that today. It may come back over the next couple days. You know, my broker is telling me, Good news, it’s only a correction, it’s only a certain percentage.
O’BEIRNE: Buy now...
MATTHEWS: This is a story, if this continues.
ROBINSON: Yes. It is. It is. And you know, the guy...
ROBINSON: ... the office gets blamed, of course, because—you know, if you’re president (INAUDIBLE)
MATTHEWS: Well, if you’re not paying attention to the—I can tell you, if you’re retired right now and you can’t make any more money as earnings, all your money comes from the money you’ve saved.
ROBINSON: Exactly. And you’re taking a hit. You’re taking a big hit. I mean, you had a nice run-up. I mean, we’ve had a good ride in the stock market the last little while, so maybe it is just a correction, as Bernanke seemed to say today.
MATTHEWS: Well, The trouble is, when you’re—as—was it—who was it that said, We’re all dead in the long run?
MATTHEWS: John Maynard Keynes, I think it was, the new economist of the ‘30s. And the trouble is, when you’re retired, you want the money now.
MATTHEWS: You don’t want anybody messing with it. You want to lock it. I guess this says buy bonds, right?
ROBINSON: Well—yes, but don’t buy them too early. Don’t buy bonds too early. You got to have that—that—you know, you got to have stocks...
MATTHEWS: OK, let me ask you—the principal question tonight I want ask you both before you leave. Is Al Gore working his way back to you, babe, as the song goes? Is he working his way back to us? He wins the Oscar on the most boring night in the history of American television. He wins the Oscar, and then he wins the Nobel Peace Prize at the youngest age anybody’s ever gotten at, probably, since Martin Luther King. Can he then lift off and say, I’m going to take on Hillary, or is he going to wait for her to fall, if she does? Kate O’Beirne.
O’BEIRNE: Chris, he’s now become this really popular Hollywood figure, and as a colleague of mine said, Hollywood is like a voter repellent to people.
MATTHEWS: Yes, I...
O’BEIRNE: I don’t know that he benefits...
MATTHEWS: Gene, do you agree with that...
O’BEIRNE: ... from being...
MATTHEWS: ... that it hurts him to be so glittery?
O’BEIRNE: ... with Hollywood—I don’t think it does.
O’BEIRNE: I don’t think Swedes (ph) -- Nobel Prize...
MATTHEWS: Will he come back from the—is he Lazarus politically?
ROBINSON: I’m not sure Hollywood hurts him that much, but I don’t see him coming back in this race. I don’t see him getting it.
MATTHEWS: I’ll tell you, there is a hunger for somebody to come in this race. I feel it. The people aren’t happy with the list they’re looking at.
O’BEIRNE: I think John Edwards and Barack Obama are pretty much...
MATTHEWS: Well, Rudy’s going up so high. People want him to be a hero.
O’BEIRNE: Now, that...
MATTHEWS: They want a man to be a hero. They’re determined to find a hero. This country desperately needs a hero to be our next president. We don’t want a middle-ground mediocrity. We want the next president to be sharp, smart and courageous. We want a great person, male or female, to be the next president. And They’re still looking over those lists.
Anyway, thank you, Kate O’Beirne—that was my speech—Gene Robinson...
MATTHEWS: ... with a great American newspaper and John McLaughlin’s old job.
Up next: President Bush’s top economic adviser, Al Hubbard. And later, CNBC’s Jim Cramer.
This is HARDBALL only on MSNBC.
MATTHEWS: Welcome back to HARDBALL.
On Tuesday, the stock market plunge sent a jolt of fear throughout the country. How worried should we be? Could recession be around the corner, at least coming at the end of the year, as the former Fed chairman suggested the other day?
We’re joined now by Al Hubbard, director of the National Economic Council. You’re the president’s economic guy. You’re the guy that works right out of the White House, right?
AL HUBBARD, DIR., NATIONAL ECONOMIC COUNCIL: I am. I work with Hank Paulson, and he’s really the chief economic adviser. And I work with...
MATTHEWS: OK. You do have a high position. What’s the president feel about the market yesterday?
HUBBARD: You know, the president feels that the fundamentals of the economy continue to be very, very strong.
MATTHEWS: Are stocks undervalued or overvalued?
HUBBARD: You know, we don’t get into figuring out whether stocks are overvalued or undervalued. What we care about is, Is this economy creating jobs? Yes, it is. It’s created over seven million since the middle of ‘03, over a half million in the last three months, over 100,000 most months. Unemployment rate’s at 4.6 percent, which is lower than it was...
MATTHEWS: OK, do communists running the Chinese...
HUBBARD: ... important.
MATTHEWS: ... worried about what happened two days ago—yesterday. The Chinese communists, who still run the government over there, said that their market’s doing too well, it’s overpriced. So they said, Cut it. So a 9 percent drop in the China Shanghai market. All of a sudden, we suffer a 3.5 point drop, too. We’re the—we’re the kid sleeping in bed with the elephant, the Chinese elephant. Is this the way life is going to be for the rest of our lives, the Chinese dictate our economic performance?
HUBBARD: You know, our economy’s about 10 times larger than the China...
MATTHEWS: Well, why did we respond?
HUBBARD: ... Chinese economy—you know—you know, I’m not in a position of—of evaluating why markets go up or down. What I care about, what this president cares about, are the fundamentals of this economy. You know, are wages going up? And yes, they are, over 2 percent real wages in the last 12 months. Are jobs being created? Yes, they are. Is the unemployment rate low? Yes, it is. Are we on a sustainable path of growth? Yes, we are. We feel very good about the future of the economy.
MATTHEWS: What this thing with housing? You hear about housing dropping. You hear about—I talked to a mortgage banker the other day who told me that a lot of people who got mortgage credit shouldn’t have gotten it. They have bad credit ratings. And they’ve lost their ability to pay these monthlies. Is that something that’s going on out there, there’s a lot of foreclosures? Is that hurting our economy?
HUBBARD: As you know, housing was at a blistering pace 12 months to 24 months ago, growing at 2.2 million units per year, which is faster than it can on a sustainable pace. Prices were going up in certain parts of the country, like here in Washington, D.C....
HUBBARD: ... faster than people could afford. And the fact is that it’s good news that the housing market has slowed down. It’s now running around 1.4 million, 1.5 million...
MATTHEWS: Why is that good news?
HUBBARD: Because that’s a sustainable pace. If you look in the ‘90s, the average...
MATTHEWS: You sound like the vice president talking about the Brits pulling out of Iraq, It’s a good sign. How can it be good that more people are having foreclosures and can’t pay their monthlies?
HUBBARD: It’s a good sign that housing prices haven’t continued to grow at an unsustainable pace, 10, 12, 14, 20 percent. You know, to be perfectly frank, housing prices on average...
MATTHEWS: Can you be perfectly frank here...
HUBBARD: Absolutely. I’m...
HUBBARD: I’m absolutely perfectly frank...
MATTHEWS: ... because you’re smiling...
MATTHEWS: ... and the market just dropped 400 points...
HUBBARD: ... coming right back at me, you know...
MATTHEWS: ... and you’re happy it’s...
HUBBARD: ... happy it keeps growing very—very—at a very sustainable pace, and we...
MATTHEWS: So you want to sit here and advise people who are watching us—a lot of people watch this show who are near retirement or retirees. You’re saying things will be OK.
MATTHEWS: Your pocketbook strength (ph) is going to be just as good in a couple months as it was before.
HUBBARD: That’s exactly right. Inflation...
MATTHEWS: Because this 400 points...
HUBBARD: ... continues to be low...
MATTHEWS: ... 400 points fairly soon.
HUBBARD: What was that?
MATTHEWS: Are we going to get back the 400 points we lost...
HUBBARD: No, I’m not going to talk about...
MATTHEWS: ... on the Dow?
HUBBARD: ... where the market’s going to go. What’s most important to us, the market will take care of itself as long as the fundamentals remain strong, and we believe the fundamentals will remain strong. We’ll continue to create jobs...
MATTHEWS: OK, let me ask you about...
HUBBARD: ... and we’ll keep the inflation low...
MATTHEWS: ... a fundamental. We keep selling (SIC) more to the Chinese, less than they sell to us. We buy more Chinese goods than they buy of our goods. We have a big deficit. Pat Buchanan was talking about it. Now, he’s against free trade. But what’s the defense of free trade if it means that year after year that, the Chinese are gobbling up more dollars of ours because we can’t sell them what they’re selling us?
HUBBARD: What’s important...
MATTHEWS: What happens?
HUBBARD: What’s important is to look at the fundamentals of our economy, and our economy continues to be strong. You know, the American worker...
MATTHEWS: You sound like Knute Rockne! You keep saying...
MATTHEWS: You keep saying fundamentals, and I’m asking you these questions.
HUBBARD: Well, that’s what’s important. I mean...
MATTHEWS: I’ll ask you this. Can we continue to run a trade deficit with the Chinese?
HUBBARD: Absolutely, we can continue to run a trade deficit with the Chinese. But the important thing is that we level the playing field, and that’s what Hank Paulson and this whole administration is working with the Chinese to accomplish. You know, we want them to deal with their currency. We want them to deal with intellectual property rights and respect intellectual property rights. We want them to level the playing field. We want them to open up their market for investment from American companies because we’re confident the American worker can compete against the Chinese, against the Japanese, against the Germans, against anyone if there’s a level playing field, and that’s the way we...
MATTHEWS: Do we want to compete against guys working—and women working for a couple cents an hour? Do we want to do that?
HUBBARD: We want to have open markets because the result of that is our workers end up with higher-paying jobs, and that’s what this president cares about.
MATTHEWS: So we’re better off buying our...
MATTHEWS: ... from Indonesia than buying it from South Carolina.
HUBBARD: What he cares about is...
MATTHEWS: I’m just asking...
HUBBARD: What he cares about is that there are plenty of jobs and that—that the high-paying jobs are left in America, and that’s what’s happening.
MATTHEWS: Are we better off buying our pants from Indonesia or from South Carolina?
HUBBARD: The important thing is that we have open markets. And you know, Toyota just announced they’re investing in Mississippi, 2,000 new jobs. Those are high-paying jobs. And by the way, there are over five million jobs in America that...
MATTHEWS: Are we better off because Chrysler’s in huge trouble, Ford’s in huge trouble and GM’s in trouble? Are we better off for that, too?
HUBBARD: Listen, you know, those companies are very good companies. They’re going to figure it out. They will—they—you know, they’ve had challenges before...
MATTHEWS: You know how they figured it out? They decided to become smaller. That’s their solution. Is that good for America?
HUBBARD: What’s good for America is that we continue to have open markets.
MATTHEWS: OK. We used to say is, What’s good for America—what’s good for General Motors is good for America. Now you’re saying General Motors is getting smaller, but it’s not bad for America.
HUBBARD: Look, General Motors has to respond to the marketplace.
They have to be competitive. And I’m confident they will be competitive.
They have very good leadership. Same thing at Ford...
MATTHEWS: Would you tell me if...
HUBBARD: ... the same thing at Chrysler...
MATTHEWS: ... the economic news was bad, Mr. Hubbard?
HUBBARD: Pardon me?
MATTHEWS: Would you tell me if the economic news was bad?
HUBBARD: Absolutely, I would tell you if the economic news were bad. How in the world can you even suggest that it’s bad? We’re continuing to grow at over 2 percent. Last year, we grew at over 3 percent. We think this year, we’ll grow in the high 2s...
MATTHEWS: Well, we thought it was 3.5, but it was 2.5, right?
HUBBARD: Well, no. It was 3.1 percent for the last four quarters.
MATTHEWS: Fourth quarter was what?
HUBBARD: Fourth quarter was 2.2 percent.
MATTHEWS: Yes, it was about a point off. Anyway, thank you, sir.
HUBBARD: I very much enjoyed it.
MATTHEWS: I wanted to debate economics with you, but it’s too boring.
MATTHEWS: Anyway, thank you very much, Al Hubbard, the top—head of the economic—National Economic Council, director for the president.
Up next, CNBC’s Jim Cramer with a somewhat different point of view perhaps. I think he’s a Democrat.
You’re watching HARDBALL only on MSNBC.
MATTHEWS: Welcome back to HARDBALL.
The stock market showed a slight recovery today over its steep losses Tuesday. Now the dust has settled. Let’s find out the state of the custody, where it’s heading and what’s yet to come. CNBC’s “Mad Money” host Jim Cramer—he’s also the author of a great new book, “Jim Cramer’s Mad Money: Watch TV and Get Rich.”
OK, people are watching TV right now, Jim, and they want to learn from you what they should be worrying about. Are you as confident as Al Hubbard, speaking for the president, just was?
JIM CRAMER, HOST, CNBC “MAD MONEY”: That wasn’t Al Hubbard, that was Mother Hubbard. I mean, where do they get that stuff?
CRAMER: You know, I look at—maybe I’m too close to 5th grade arithmetic because of my children. But when it’s growing at 2 percent, that’s actually slower than 3.5 percent and not as good. But maybe I’m just too critical.
MATTHEWS: Well, I’m asking you your assessment. Forget what you just heard from the White House. He has to be somewhat bubbly. Let me ask you about this question...
CRAMER: Yes, but I mean, like, he’s...
MATTHEWS: Will the market...
CRAMER: ... champagne! I mean, come on!
CRAMER: I don’t like...
MATTHEWS: Cramer, I need to know this! It dropped 400 points. It came back 40-something. Will we regain the 400 points in the next month or two?
CRAMER: Only if the Federal Reserve cuts. And the Democrats have been given a—not that they would know it. They’ve been given an issue on a silver platter. They keep calling it “sub-prime” loan. Hey, Chris, you know what sub-prime is? It’s working class loan! And working class people will not get loans.
CRAMER: That’s how housing starts to go down 16 percent.
MATTHEWS: OK, let’s talk about this. I hear from a friend of mine—anecdotal—that one of the problems out there in domestic economics is that people got loans to buy homes, they got mortgages on bad credit. They’ve continued to have bad credit. They haven’t been able to pay them off. That’s a problem for the lending institutions. Is that part of this problem? And if so, will cheaper rates help them?
CRAMER: There are two parts to the problem. One was the speculators who were buying four, five, six houses. I know them. You probably know them. They’ve been blown away. Those guys are (INAUDIBLE) But then there’s all the other people who just frankly need a better rate in order to be able to buy a house. And the rates are stuck because the short-term rate that the Fed controls is at 5.25 percent, risen 17 times!
MATTHEWS: Why’s Bernanke still...
CRAMER: Come on! Lower our rates!
CRAMER: Let the working class people get a loan, for heaven’s sake!
MATTHEWS: OK. Democrats have long argued for cheaper money.
Republicans have argued for harder money. It’s the oldest fight in the world. It goes way back to at least a century of fighting. Are the Democrats right...
CRAMER: I’m not McKinley!
CRAMER: I’m not McKinley!
MATTHEWS: You’re the opposite...
MATTHEWS: OK, you’re—you’re—who’s that guy...
CRAMER: William Jennings Bryan!
MATTHEWS: William Jennings Bryan, “the cross of gold.” Are you believing that we have no fears from inflation, therefore Bernanke’s wrong?
CRAMER: Oh, he’s—yes! We’re in a deflationary spiral starting in
since this year began. It reminds me of what happened last year in May.
Other than gold, commodities are coming down pretty hard here. I’ve got to tell you, I am worried about a very serious slowdown developing this year...
CRAMER: ... if the Fed doesn’t get off the dime.
MATTHEWS: Deflation is when you make something, and it costs more to make it than to sell it. Are we...
CRAMER: That’s what the Chinese do. They’re deflationary to our economy.
MATTHEWS: Let me ask you this. The Japanese—or the Chinese communists decide that they want their economy to slow, so they say to the stock market people (INAUDIBLE) in a command economy, not like here.
MATTHEWS: They tell you, You got to stop—you got to lower prices somehow. (INAUDIBLE) less (ph) action. That’s a 9-point drop. We suffered a 3.5 point drop the other day because of their decision. Are we now under the reign of the Chinese? Do they dictate our economic future?
CRAMER: I think the Chinese are probably more important to the direction of the stock market than almost anything other than the Federal Reserve. They weren’t even a factor 10 years ago, 5 years ago. Now they’re the second biggest factor, other than the Federal Reserve. I care more about China than I care about Ford Motor, I care about GM...
MATTHEWS: Can they dictate to us?
CRAMER: Yes! Yes, they—yes. I mean, hey, listen, I got to tell like it is. I know that they’re “chicoms,” but they’re powerful.
MATTHEWS: You sound like...
MATTHEWS: ... you’re working with the Flying Tigers. “Chicoms” is an old term...
CRAMER: We’re at the Yalu River, and I got to tell you, we shouldn’t have crossed the parallel!
MATTHEWS: OK, thank you. They are communists, and they’re not our best friends when it comes to this. Anyway, thank you, Jim Cramer.
CRAMER: Thank you.
MATTHEWS: Good luck with the book.
CRAMER: Thank you.
MATTHEWS: “Mad Money: Watch Television, Get Rich.”
Play HARDBALL with us Thursday. We’ll have the latest on the Scooter Libby trial. It could be coming to an end.
Right now, it’s time for “TUCKER.”
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