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'Up w/Chris Hayes' for Saturday, June 9, 2012

Read the transcript to the Saturday show

Guests: Peter Schiff, Karl Smith, Betsey Stevenson, Dedrick Muhammad, Jonathan Alter, Karl Smith, Dedrick Muhammad, Betsey Stevenson, Michael Tesler

CHRIS HAYES, MSNBC ANCHOR: Good morning from New York. I`m Chris
Hayes. U.N. observers inspecting the site of Wednesday`s massacre of at
least an estimated 70 people in Syria that they found evidence of
government vehicles around homes there. The Syrian government denies
responsibility. Fifteen people died in new shelling overnight.

But I want to start today with my story of the week, the man who may
determine the nation`s economic future and the winner of the 2012
presidential election. On Thursday, Federal Reserve chairman, Ben
Bernanke, went up to Capitol Hill to testify in front of the joint economic

He faced a fairly skeptical, even hostile audience, primarily the
Republicans, who think Bernanke has been doing too much to help the


REP. KEVIN BRADY, (R) TEXAS: I wish you would look the market in the
eye and say the fed has done all it can, perhaps, too much.

SEN. JIM DEMINT, (R) SOUTH CAROLINA: I think you`d have to agree that
the activism has been unprecedented.


HAYES: Bernanke was his normal, mild-mannered, calm self largely
untroubled by his interlocutor`s bards (ph).


SEN. DAN COATS, (R) INDIANA: Given the kind of fragile state that
we`re looking at, fragile world that we`re looking at from the economic
standpoint and, particularly, the situation in Europe as it`s unfolding, do
you sleep well at night?


COATS: Do you sleep well at night?

BERNANKE: I generally sleep pretty well, yes. But I have a lot to do
during the day. And I need to be well rested.



HAYES: He assured the members of Congress that if things get really
bad, the fed will be there to help.


BERNANKE: As always, the Federal Reserve remains prepared to take
action as needed to protect the U.S. financial system in the economy in the
event that financial stresses escalate.


HAYES: But the point is that things are already bad. And Bernanke
was never asked the one question that had I been sitting up on desk I would
have liked to ask him. Mr. Chairman, your academic research shows the
necessity of central bankers taking aggressive, sometimes, unprecedented
action in the wake of financial crisis in order to avoid long-term
stagnation and economic misery.

And yet, as Federal Reserve chairman, you seem to be entirely ignoring
your own research. The fed refuses to take action to address the jobs
crisis in this country even as inflation stays at where below target. You
are ignoring your legal mandate, ignoring your own research, ignoring the
misery of millions who are unemployed for no good reason.

My question for you, Mr. Chairman, is, are you trying to get Mitt
Romney elected president? Provocative, sure, but worth discussing, because
we continue to have unemployment crisis in the country that is engulfing
labor force inflames and rather than even attempt to put up the fire.
Bernanke and the Federal Reserve are content to simply sit back and watch
it all burn.

Assuring us not to worry, if things get really bad, they`ll come to
the rescue. Meanwhile, the entire block is going to be reduced to ash. Of
course, because we`re in campaign season, most of the media focus has not
been on Bernanke, but instead on the two men vying to be the next

In the wake of the recent awful jobs report, President Obama and Mitt
Romney had it back and forth this week about job creation or lack thereof
and who is to blame for it.

As president point out, the economy has a net positive of 50,000
private sector jobs under his watch, which is impressive given the fact
that he inherited an economy in the worst pre-fall in 70 years, losing
almost 600,000 jobs the month he was inaugurated.

And even more shockingly, contracting at a rate of 6.3 percent, almost
twice as bad as we thought at the time based on the data we had. And then,
there`s the fact that Mitt Romney has his own job creation record, and
that`s pretty embarrassing.

While he was governor in Massachusetts, the state ranked 47th in job
creation, and in defending that, Romney campaign advisor, Eric Fehrnstrom,
said this.


Massachusetts was in economic basket house. If you throw D.C. into the
mix, we were 51 out of 51. By the time Mitt Romney left four years later,
we were in the middle of the pact. We were 30th in the nation.


HAYES: In other words, I inherited a very crappy situation and
improved it. Don`t blame me for the job losses, blame my predecessor who
turned the state into a basket case. You`ll note that sounds familiar.
When the president has tried to make the same argument, this has been
Romney`s response.


quick to find someone to blame.


HAYES: The speaks to what can be done now. The May jobs report along
with other indicators show an economy that`s still suffering from the
stress of deleveraging and then adequate demand. The Republican Party
knows full well that continued economic dysfunction suits their political
interest, so they have literally know political incentives to make things

Which brings us back to Bernanke and why he should start viewing -- we
should start viewing his salary as an in kind contribution to the Mitt
Romney Super PAC. More than any other single individual in the country,
Ben Bernanke holds the fate of the U.S. economy in his hands.

And at such, he holds the portion of Barack Obama, the Democratic
Party, and the legally of liberal governance in his hands, as well. Now,
you will hear from some corners, even from Mr. Bernanke, himself, that
there`s not much the Federal Reserve can really do.

The fed`s mission is macro economic management, to steer the economy
between two opposing pitfalls, high inflation on the one hand and high
unemployment on the other. The tool it uses to navigate this is short-term
interest rates. If inflation is getting too high, the fed can raise rates
making it more expensive to borrow money, slowing the economy, and
ultimately, bringing inflation down.

On the other hand, when employment is high like it is now, the fed can
cut interest rates making it easier to borrow money and giving a boost to
economic growth and employment. You might notice there`s a very, very
important asymmetry at the heart of the fed`s approach to managing the

During times when inflation is stubbornly persistently high, the
Federal Reserve can keep raising rates and raising rates until the fever
breaks and inflation comes down. That`s precisely what Paul Volcker
famously did during the 1970. Rates went all the way up to 20 percent
which triggered a recession.

One that more or less killed Jimmy Carter`s chances for re-election,
but I digress. But what happens if you had, as we do now, persistently
high unemployment? Well, you can cut rates, but unlike raising rates,
which you can always do more, after cutting rates a few times, you
eventually end up at zero percent, and there`s nothing left to cut.

This is what economists called the zero lower bound. And it just so
happened that the zero lower bound and house central bankers should deal
with it with the subject of much of Ben Bernanke`s academic research.

Bernanke studied the aftermath of financial crisis and came to the
conclusion that when central banks near the zero lower bound that they were
far too reticent and unwilling to turn to unconventional means of monetary
policy. And this reticence caused a whole lot of unnecessary misery in
places like, say, Japan.

Here is what he wrote about Japan`s central banks unwillingness to be
more aggressive in 2000. "Japan`s economy has operated below potential for
nearly a decade. Nor is it by any means clear that recovery is imminent.
Policy options exist that could greatly reduce these losses, why isn`t more
happening to this outsider, at least? Japanese monetary policy seems
paralyzed with a paralysis that is largely self-induced," unquote.

In fact, so unconventional is Bernanke`s thinking on this and so
creative, he once famously seem to endorse Milton Friedman`s suggestion
that if all else fails, the central bank could just send out helicopters to
drop bags of cash on the populous in order to stir (ph) growth and bring
down unemployment. It`s where intend the nickname "Helicopter Ben."

And, yet, while the Federal Reserve did take a variety of
unconventional steps during the immediate crisis and its aftermath, for the
last 11 months, it has been content to sit on its hands, telling Congress
to do more, and sighting the zero lower bound as an excuse to let its own
helicopters sit idle in their hangers.

It seems to go against everything Ben Bernanke said he believed in.
How can this be? This is the great mystery stalking those who closely
follow monetary policy. In fact, a friend and fellow economist of Bernanke
named Larry Ball (ph) has even published a working paper entitled, and I`m
paraphrasing, "why the hell won`t the Ben Bernanke of today listen to the
Ben Bernanke of yesteryear?"

Even articles in the conservative magazine, "The Economist," have
urged Bernanke to get off his tucas (ph). And while it might seem like an
academic argument or a nerdy game of clue, the question of what`s gotten
into Ben is quite literally the single, most pressing question in the
entire political economy right now.

Congress won`t let the fingers stimulate the economy, and the
president can`t do very much without them. So, Bernanke is, for the next
six months, the only game in town.

Many people suspect that Bernanke is letting the economy struggle not
because he wants Mitt Romney elected, though, let`s be clear, Bernanke is a
Republican who served as economic advisor to George W. Bush and was
appointed to the fed by Bush, but rather because he`s under tremendous
pressure from the Tea Party Ron Paul wing of the Federal Reserve board not
to do anything.

In fact, bullying Bernanke into quiescence has been an explicit right-
wing strategy. Remember this?


prints more money between now and the election, I don`t know what you all
would do to him in Iowa. We would treat him pretty ugly down in Texas.


HAYES: Yes. Well, Bernanke faces angry questions from right-wingers
before Congress. Democrats are exerting exhibited no pressure. It`s
another kind of distracted asymmetry that will lead to prolonged
unemployment and poverty for millions, not to mention the premature end of
the Obama era.

So, until Mr. Bernanke answers the question of whether he`s trying to
get Mitt Romney elected and while there`s still a chance for us to avoid
another recession, I think it`s time Bernanke started to feel some heat
from the left.

I want to find out whether my panel thinks Ben Bernanke is trying to
put Mitt Romney in the White House right after this.


HAYES: And joining me now to discuss that, we have Karl Smith -- I`m
sorry. If you`re just tuning in, I should say that I was just talking
about Ben Bernanke and his performance this week. And the fact that it
appears to me that he is attempting to get Mitt Romney elected president,
because the fed is sitting on its hands idle while we have the unemployment
and labor crisis in this country.

Peter Schiff is going to disagree strongly, strongly, strongly and
vehemently with that. But right now, we have Karl Smith, the assistant
professor of economics and government at the University of North Carolina
at Chapel Hill, contributor to the blog,

Betsey Stevenson, assistant professor of business and public policy at
the University of Pennsylvania Wharton School and former chief economist of
the Obama labor department.

Dedrick Muhammad, senior director of the economic department from the
NAACP, and the aforementioned, Peter Schiff, president of the brokerage
firm, Euro Pacific Capital, former economic advisor to Ron Paul`s 2008
presidential campaign and author of "The Real Crash: America`s Coming
Bankruptcy," former candidate for the Connecticut Republican Senate

And because I made Peter sit through an eight-minute monologue in
which he disagreed with every word, including "and" and "the." I will view
the floor first to respond.

PETER SCHIFF, AUTHOR, "THE REAL CRASH": First of all, I think you
overestimate what the fed can do to help the economy. You don`t create
economic growth or jobs by printing money. What you do create is bubbles
and inflation. You have to remember, it was the artificially low interest
rates that where the principal cost of the housing bubble.

And therefore, the fed is to blame for the financial crisis that
ensued. So, right now, we don`t need more cheap money. That is preventing
the economy from restructuring along the lines that will actually give us
lasting economic growth. We need much higher interest rates. Of course,
that`s going to bring on some short-term pain, but unfortunately, we need
that to get the long-term gain.

HAYES: This is the liquidationist, Andrew Carnegie, you know, let
prices find a bottom. Let there be suffering and mass misery, and that
mass misery will kind of wrench the pain out --

SCHIFF: Remember, there`s more misery if we don`t bite the bullet,
and we didn`t follow Andrew Carnegie`s advice during the 1920s. Hoover
ignored it. He did what Obama is doing. He did what Roosevelt was doing.
That`s why the depression lasted through the end of the Second World War.

HAYES: I`m not the economist of the table, so I`ll throw it over to
you guys, but I want to make two points in response to that. One in terms
of -- whether the fed did or did not cause a housing bubble.

I think one of the things that`s important to recognize is that if you
look at the history of capitalist economies, there are all sorts of bubbles
that happen all the time, right? Throughout the history, economists --
sometimes the central bank, sometimes without them. In fact, panics and
crashes, Taylor Barger (ph) looks at, and this is the sort of economical
text, right, on financial crashes, is that even when you don`t have a
central bank, they come up with ways to fund the bubbles, right?

SCHIFF: Yes, but it`s much bigger when you have a central bank and a
government and FIAT money, and we`re going to suffer. But, you know, the
real fiscal cliff is not this phony one that we`re talking about at the end
of the year when the budget deficit might actually come down a little bit.

The fiscal cliff is when interest rates skyrocket and the government
can`t afford to pay the interest on the enormity of debt that`s been
accumulated in the last few years.

HAYES: Karl, I want you to respond to this. I mean, the one other
thing I`ll say is, you know, I think it`s important to distinguish, and I
think Bernanke does and other people who study this distinguish between how
the fed is operating in normal times and how it`s operating in post-crisis
times, right? I mean, things are different when you have the fall out from
a financial crisis.

mean, I don`t know what point we want to debate this at, you know, because
that`s probably screwed everything you said, but --


SCHIFF: You`d be wrong.

SMITH: So, I don`t think there`s a lot of evidence that the fed
caused the housing bubble.

SCHIFF: Well, remember, I predicted in advance. I was alone in that.
I knew about it.


SCHIFF: Check it out on YouTube.

HAYES: No, no, no. You were against some of the guys on Wall Street
who also don`t really know what they`re talking about.


SMITH: But, you know, I said there was a bubble. Paul Krugman came
and gave a talk in 2007 how there was going to be a housing bubble.

SCHIFF: He advocated for it. He thought it was going to solve our


HAYES: But continue.

SMITH: So, lots of us thought that there was a bubble. I mean --

SCHIFF: They also had the financial crisis from when it would burst.

SMITH: I mean, I did.

SCHIFF: I didn`t see you out there with me, but all right.

SMITH: But, further more, I mean, so we had lots of secure ties
through securitization. We had CDOs. We had all these products. And I
think that was probably the heart of what caused the bubble. And we could
talk a lot about --

SCHIFF: Well, it was Fannie and Freddie --


HAYES: I don`t want to talk about the cause right now, because I want
to talk about what we can do now. And I think there is this open question
of people on the left and the right. You know, I was making a strong case
there for fed action. The fed can do things. People say there`s nothing
the fed can do. It`s, quote, "pushing on a string."


SMITH: Yes. So, I mean, what the fed could easily do is simply say
that it`s willing to tolerate a little bit more inflation. That it would
allow inflation to go up to three percent. And I mean, we can sit and
argue about what we really think inflation is, but we can say, we measure
the P.C. deflator, right?

HAYES: Explain what that is. Explain what that is. Let`s keep it.

SMITH: Personal consumption expenditures is the part of GDP. It`s
what normal people buy.

HAYES: It`s a basket of goods.

SMITH: basket of goods that people buy. And then we go out. The
government goes out and buys it every month and then writes down --

HAYES: Literally, it`s this amazingly thorough process in which they
go out and they buy it.


SMITH: They calculate how much it costs, right? And so we can just
say, look, we`ll let that go to three percent, but we`ll let that go to
four percent.

SCHIFF: But how does making that basket more expensive help people.
How does it help the economy if they have to pay more for --




SMITH: OK. There`s several ways. The most straight forward way is
that when that happens because people are spending more money, people are
buying more stock. I mean, you believe in supply and demand, right? So,
prices go up --

SCHIFF: But supply doesn`t go up. It`s demand.

SMITH: So, demand goes up, right? And then, that makes businesses
want to supply more stuff. They can do this now because we have unemployed
workers who they can hire and then make things.


SMITH: So, here`s a prime example of this, right? So, we`ll talk
about the car industry. And this I also predicted when it comes to (ph)
predictions, which is that -- we would have a surge in new car sales, they
would go up to 14 million, right? And that would result in workers in the
Midwest being rehired.

And we`ve seen the unemployment rate in Michigan and Ohio start to
collapse. We`ve grown manufacturing jobs for the first time in something
like 20 years. We`ve had growth in manufacturing jobs. And that`s
happening because people are buying cars.


SCHIFF: It`s going to create more misery for the people who are

SMITH: But think, for a second, about how you get inflation, right?
So, it`s not --

SCHIFF: Bunny trending. That`s how --

SMITH: OK. So -- but it`s not as if you print money and then
magically prices go up.

SCHIFF: Well, sometimes, it prevents prices from falling, but it`s
always damaging the economy.

SMITH: Well, by magic. There`s a supply and demand.

SCHIFF: Yes. And if you have too much money being supplied, prices

STEVENSON: OK. So, first of all, that is actually not the
relationship between the monetary supply and prices. It`s not a direct
relationship between prices and monetary supply. There`s this other thing
that you learn in your first year economic class, which is velocity and how
many times these dollars turn over.


STEVENSON: But this is why it`s important that we actually measure
prices, because we need to find out what`s happening in the prices, and
it`s not enough to say what are we doing to the money supply. So, we look
and see what`s happening to prices. And, you know, I should -- we measure

And one of the big mistakes we make when measure prices is we never
know how much to adjust for quality. So, we know quality is rising, so our
price increases might even be lower.

SCHIFF: Well, a lot of times, quality is going down. Have you been
on an airplane lately? I mean, there`s a lot of price declines that don`t
get captured into the CPI.

STEVENSON: The -- but the way the thing about what the fed does is
the fed has two policies. It`s a two mandates, right? It`s trying to
think about employment, maximum employment, and it`s trying to think about
inflation. So, the question isn`t how does having higher inflation help
people. What we`re trying to do is do something that`s not rocket -- I
mean, that`s not very extremely precise, right?

We`re trying to target something that we have a hard time measuring
that we`re not exactly sure how things are going to respond, and we`re
trying to target two separate things. We`re trying to target employment
and we`re trying to target prices. And we`ve got to tolerate missing a
little bit on prices and missing a little bit --

HAYES: I want to talk about the politics of this and the pressure
that comes from either side and the kind of questions that Bernanke faces
at the joint economic committee right after we take a break.


HAYES: Well, it`s Saturday at 8:24 a.m., and we are debating monetary
policy. We talked about the fed. I want to zoom out for just one layer of
detail, because I think one way you`ll understand this, in the way that I
understand it, is that there are different pressures on the Federal Reserve
to act in different ways.

And what I see when I watched the testimony yesterday of the Joint
Economic Committee is that one -- there`s one political party that very
explicitly is saying the kinds of things that you`re saying, Peter.

You`re saying that, you know, inflation is higher than the official
headline number. That the fed doing things like quantitative easing which
was one of the sort of unconventional things they did during the crisis to
try to increase the monetary supply and kick start the economy.

That that`s a disastrous path to follow. Ron Paul, obviously, has
made these ideas quite famous, but it`s spread throughout the Republican
Party. It`s now kind of central Republican Party.

SCHIFF: Sure, but I would say most Republicans don`t understand how
bad it`s going to get when the fed does the right thing after having done
the wrong thing for so long. When they finally let interest rates go up,
it`s going to be very problematic for a country that is so over leverage.
Banks are going to fail, the government is going to have to default on a
lot of its obligations.

You just think about how much we borrowed. You mentioned what
happened under Paul Volcker. Let`s say in a couple of years, the official
funded debt is 20 trillion. If interest rates go to 10 percent, it`s going
to cost us a trillion dollars a year just to pay the interest on the
national debt.

HAYES: People have been predicting the interest rates bikes (ph) for
awhile. They`ve been predicting very high levels of inflation.

SCHIFF: And it`s been happening (ph).

HAYES: It has not happened yet. But let me ask you, I want to ask
you this, because obviously, the views that you hold that are, I think,
broadly in the sort of same conceptual areas of Ron Paul and other people.
Do you think that those views have become more popular among the Republican
Party and have been articulated more --

SCHIFF: At first, actually, my math was wrong. It`s two trillion a
year in interest at 20 trillion.

HAYES: Sure.

SCHIFF: So, that`s the entire tax collection. But, look, I don`t
think that people understand how the feds roll, how instrumental it has
been to creating all of the macro economic problems that are plaguing us
right now, because by keeping interest rates too low for too long, it
screwed up the economy.

We don`t save enough. We don`t produce enough. We have too many
people working in the service sector, in government, in banking, in retail,
in healthcare, and education. Meanwhile, we can`t produce the things that
we need to consume.

We have $50 billion a month trade deficits because this economy
doesn`t work anymore because all the resources are misallocated. It`s
going to be painful to put them back together. But if we don`t do it,
we`re going to have a real crash in this country.


DEDRICK MUHAMMAD, NAACP: Can I jump in real quick?

HAYES: Yes, you can. Please. How are you? Nice to see you.

MUHAMMAD: I just want to put forward. I mean, I think the focus, the
conversation has kind of been overly to focused on one particular area.
Like, I don`t see how we can blame the entire recession or the whole fiscal
crisis upon the fed. And I also don`t really see that the solution to
everything is going to be strictly a monetary policy.

And I think most people generally agree that there is -- I mean, also,
you talked about that there`s overall political crisis. And I think it
would behoove us to talk more about how maybe the fed fits into that, but
it`s not just the fed or nothing or the fed is going to solve it because I
don`t believe --


STEVENSON: That`s a really important point. And that`s, in fact, the
point that Bernanke made in his testimony, which was he said, I need some
help from Congress. You guys have a job to fiscal policy and monetary
policy work together.

SMITH: But he`s wrong and he knows that, right? So, I mean, we can
say whatever, but --

MUHAMMAD: What is wrong?

SMITH: Bernanke is wrong --

MUHAMMAD: Well, he (INAUDIBLE) too. He`s not just wrong.

SMITH: I mean, what -- what -- you know, monitor (ph) is on the right
and (INAUDIBLE) on the left came to understanding of in the 1990s or
whatever is that the primary driver of business cycles is action by the
Federal Reserve. And Ben Bernanke can alleviate the entire recession by
himself if he so chose.

MUHAMMAD: No, he can`t. He can make it much worse.


HAYES: No, but here`s my point, though. And he has said that.
Here`s my point. Here`s my meta point, which is important, and I think for
people at home, this is very important. You, Peter Shift, your views have
a lot of traction in the Republican Party.


SCHIFF: Maybe with Ron Paul, but not -- I mean, he`s not the typical

HAYES: Well, here, look, I`ll show you -- I`ll show you -- let`s show
Mitt Romney talking about Ben Bernanke just as an example of this. This is
a question at NBC debate about whether Mitt Romney would re-appoint Ben


UNIDENTIFIED MALE: Would Ben Bernanke have a job in your

ROMNEY: No, I`d be looking for somebody new. I`m -- I think Ben
Bernanke has over-inflated the amount of currency that it`s created. QE2
did not work. It did not get Americans back to work. It did not get the
economy going again.


HAYES: Now, my point here is that the position that you just said,
Karl. You just said Ben Bernanke can solve this by himself, which is a
view you never here articulated anywhere in politics.

My point is that there is an asymmetric -- there is an asymmetry in
politics and in the debate we have, which is that the views that Peter had
articulated have gained a lot of traction that are no one on the internet -
- I didn`t realize until very recently that there was, essentially, the
view that you are articulating, and in fact, a lot of economists have been
saying, right?

That the fed is doing too little to actually the fed could solve the
business cycle. And so, what it seems to me is that the seesaw is being
sat on of only on one side and that`s part of what`s producing the fed in

STEVENSON: So, it doesn`t really every single mainstream economist
that I know thinks the fed has done too little. And, this is actually
really, really unusual time for the fed, because the fed has often, over
its history, faced political pressure, but it`s actually usually from the
left. Political pressure because it`s not doing enough about employment.

And this is a very new time where it`s facing a lot of political
pressure from the right, from people who are paranoid about inflation going
crazy and are really paranoid about how they act. And I think that they
have to respond to this pressure, because one of the things we know when we
look at the history of central banking is that an independent central bank
is actually what prevents inflation from getting out of control.

And what they`re fearful of is losing that independence, because we
know that if we turn our central banking over to people like Ron Paul, we
will end up with a disaster. And so, we`ve got to balance a very tight
line of being able to work within the political system and not lose that
independence, but, yet, do the actions that we want them to do in order to,
you know, help the economy.

SCHIFF: Inflation is going to run out of control. It`s going to
devastate the economy. The fed has no tools now to contain it, because if
they have to raise the interest rates in order to fight the inflation genie
that they have let out of the bottle, the U.S. government is going to have
default on its funds. We`re going to have failures in the banking system
without any bail outs. It`s going to be a much bigger collapse than what
happened in 2008.

SMITH: When are we going to have the inflation?

SCHIFF: It`s already here.


HAYES: Peter Schiff, the president of the brokerage firm, Euro
Pacific Capital, thank you for your time this morning. I really

How Bill Clinton mess up Barack Obama`s week? Up next.


HAYES: We`re back, and I`ve broken Karl Smith`s heart, because we`re
not going to be debating monetary policy anymore. He said he wanted to do
that for two hours.


HAYES: He`s raring to go. We have Jonathan Alter now sitting at the
table. Jonathan, thank you for coming in. You know him as MSNBC analyst
and also columnist from "Bloomberg View." I want to talk about -- we`ve
been talking a lot about monetary policy this morning.

And the reason I talked about it, and -- it`s one of these things
were, you know, you struggle as a journalist on this, because it`s really
important what the fed is doing, and I do feel that the playing field is
empty on one side, like, if you read conservative media, if you watch Fox
News, if you watch Fox Business News, if you listen to that world, they`re
talking about the fed all the time, and they are putting pressure on the
fed not to do anything.

And if you look at the joint economic committee and if you read
progressive publications or you watch, you know, progressive media, there`s
just less discussion of it. And so, I`m trying to fill the vacuum, but
it`s hard because it`s technical stuff. It takes a lot of explaining,
monetary policy like even getting through the phrase, "monetary policy" --

interested in money as conservatives.


ALTER: They honestly, you know, pound for pound, liberal pundits know
a lot less about the fed, the structure of the fed --

HAYES: Yes. I would say that`s absolutely true.

ALTER: Fed does. Then --

HAYES: -- than conservatives, particularly, because the whole
universe of Ron Paul people who are devoted to --

ALTER: Not just Ron Paul people, people from the business community
and Wall Street. They understand more about monetary and fiscal policy.
Some of what they understand is wrong. But you noticed this just the other
day when Bernanke was up on the Hill, and the liberals, when it was there
time, they questioned him except for Carolyn Maloney from New York, none of
them said hey, whatever.


STEVENSON: So, I think that`s actually why they typically -- looks
like they`ve prioritized inflation over employment, even though, it`s
supposed to be a dual equally weighted mandate.

HAYES: Right.

STEVENSON: And we haven`t had -- we haven`t had conservatives,
really, I don`t know how else to say it, but, like, have crazy views about
inflation until more recently. So, what they -- they`ve had reasonable
views, and they just wanted to make sure that inflation was a top priority.
And, as a result, some people on the left who were wiser would say hey,
wait a minute, you need to, you know, care more about employment.

And, I think we`ve actually moved it away where the rights views on
monetary policy have gone into a direction that`s sort of hard to
understand. And then the left cares less today than they`ve ever cared

HAYES: Right. And that`s creating part of the crisis.

STEVENSON: Yes. They`re not -- why didn`t they push back? Why
didn`t they say at nine percent employment, we absolutely should be doing
more? Who cares if we have three percent inflation?

SMITH: But there`s a deeper sickness in that, which is this, I mean,
I don`t think, by any means, I`m progressive. But the right, I guess,
leaning economist who believe what I believe and who think about the
economy have stopped talking about it.


SMITH: I mean, there are plenty of people -- there are plenty of
conservative economists who believe that the fed should do more, and they
stop talking about it. And they`ve let Ron Paul, they let Peter Schiff
have the conversation. And that, I think, is shocking and jarring and for
several years into it.

I didn`t say anything about the fed because there`s this understanding
that we all circled around wagons, and we don`t air our dirty laundry,


SMITH: You tell other economists we need to be doing more, but nobody
on the right has allowed to set future.

MUHAMMAD: Yes. I mean, I think also part of the problem with the
whole monetary policy discussion is we did into is just kind of when we
talk about the fed, it seems like we`re only talking about the issues
within the fed within this kind of mysterious piece. And I don`t hear
people generally talk about in ways that the average person could
understand how it relates to the larger jobs.

And also to this idea that -- any idea that Ben Bernanke can just
magically do with by himself without out the idea that he, too, isn`t part
of a larger political structure and problem challenge that we need to deal
with the whole issues of the kind of political roadblock around how to give
the economy going again and how to, I think, more importantly restructured
the American economies who had a rebuild in America and the middle class.

HAYES: And that`s where, actually, I think these critique critiques,
there`s interesting axes upon which these debates about the current
economic recession go that`s sort of left-right, but there`s also long-
term, short-term. There`s also, did we have this coming, in a way, this
crisis? Or was this just a random forest fire, right?

I mean, there are different ways to think about where we are. One of
the things that I think that we`re seeing is whatever we`re going to do
going forward, and the president has talked about this in a variety of
speeches about sort of addressing the short-term and also the structural
problems of the economy.

There`s low-hanging fruit that we are not dealing with. And it drives
me nuts to watch it. And one of those is not firing a bunch of teachers
and policemen and firefighters at the local level just not doing that,
right? We don`t necessarily how we can create jobs in the private sector,
but what we can do is not be firing people.

The president and Mitt Romney had an exchange about that yesterday. I
want to play that right after we take this break.


HAYES: All right. talking about the back and forth between the
president and Mitt Romney about jobs. And one of the points that has been
made here is when you look at the trajectory of jobs, one of the low-
hanging fruit is that we`ve lost 600,000 jobs in the public sector in the
last few years.

And those were people that were laid off largely not because they were
doing a bad job, right? Not because people thought we need less
firefighters in this town in California. But because all the states have
to balance their budgets, and when there`s a recession like there is now
and tax revenue go down, you`ve got to cut somewhere.

And the cuts have come on a lot of municipal and state workers.
Here`s President Obama making that point.


weaknesses has been state and local governments, which had laid off 450,000
Americans. These are teachers and cops and firefighters. Congress should
pass a bill putting them back to work right now, giving help to the states
so that those layoffs are not occurring.

stimulus. He wants to hire more government workers. He says we need more
firemen, more policeman, more teachers. Did he not get the message of
Wisconsin, the American people did. It`s time for us to cut back on
government and help the American people.


SMITH: I mean, I think that`s in our talking about this during the
break about. I mean, it`s amazing that where at a point where just to
argue that the government shouldn`t be a drag on the economy. That the
government shouldn`t be doing where its state or local federal mass
layoffs. And the debate that that hurts the economy shows that we`re in a
very kind of backwards type of discussion.

I mean, I think at the least, we don`t want government to be a drag on
the economy. And I would propose and I was a supporter of the American
Jobs Act that actually would go as in anyways who`s too limited and that it
was just kind of defending jobs.

We need to do much more to build out jobs and to help create
pipelines, because again, we`re not just in a bad situation in the last few
years. There`s been an ongoing crisis of kind of an aggressive losing the
American middle class.

HAYES: Dedrick, what is your understanding of why there is this gap
between -- why is something as simple as -- I mean -- something called
revenue sharing, right, which happens during recessions in which you send
money in federal government in which (INAUDIBLE) deficits during recession
sends money to states to prepare the balance to avoid this kind of cuts and
job losses. That was a bipartisan fairly non-controversial ways --

ALTER: It was originated by Richard Nixon.

HAYES: It was originated by Richard Nixon, so why has that become

MUHAMMAD: Well, I mean, again, I think it goes with overall political
debate -- if you can get and do much better and I even, but it`s very much
an ideological piece where people hear their kind of representatives from
the conservative forces that this idea that any type of government
spending, except for government spending that might really help them, like,
maybe Medicare or if you`re in the military. Any time the government
spending is bad and somehow destructive to your economy, we need to get
behind that.

ALTER: To my mind, it`s a little bit complicated by the fact that the
growth in government over the last 25 years has not been at the federal

HAYES: Right.

ALTER: It`s all been at the state and local level. And a lot of it
has been fat accumulating around the middle the way it is in the human
body, right? White collar, state employees who the public, with some
justification, believes isn`t always doing all that much. And they`re
getting big pensions.

Well, Romney stepped in it and it made a much bigger gaffe than Obama
did yesterday is by actually saying no, we don`t need more police, fire and
teachers, because every American knows that we do, and they are our
heroes. They are engaged in the most noble profession.

So for Romney to get on the wrong side of that was idiotic of him, I
think, politically. but when the conversation is about police, fire and
teachers, Obama is going to win. If the conversation is about state
bureaucrats and their pensions, he`s going to lose that argument.

HAYES: And here`s my own pet theory for how this conversation -- why
the conversation has gone the way it is. Here, the unemployment rates for
people by different education levels, OK? People with a bachelor`s degree
or higher, it`s a 3.9 percent unemployment rate. It`s essentially full
employment, right? There is no recession for the people with the --

STEVENSON: No, that`s higher than let`s say --

HAYES: And they`re higher when they usually do, but --

STEVENSON: But it`s not as painful.

HAYES: Exactly. Look at some college or associate degree, 7.9
percent. High school diploma or less is at 9.3 percent.

And I think there`s just a radical disconnect between the elite
circles of policymakers and the people that are in the media who are moving
in worlds in which everyone has bachelor`s degrees and the height water
mark of desperation and misery that was clause by the immediate act from
mass recession has receded.

And the rest of the country in which the levels of unemployment are
much higher. And that disconnect means that there`s essentially no actual
energy. There`s no fire being lit under anyone to do anything about jobs.

STEVENSON: Well, I think what`s really important about these numbers
is this recession has really highlighted the importance of education and
how much we`re actually failing on that front. I mean, when, you know, we
had our last really big recession in the 1980s, we were a leader in
education around the world. Today, we`re not a leader at all.

And, we`ve, you know, we`re -- we`ve not only not looked at this
recession and said hey, we need to be investing more in education, we`re
actually cutting. So, we`re spending less in education which is going to
put us in an even worse position 10, 20 years down the road.

HAYES: How Bill Clinton messed up Barack Obama`s week? That`s next.


HAYES: Former president, Bill Clinton, with the opening act at three
separate fundraisers for President Obama here in New York on Monday,
including one at the home of the billionaire hedge fund executive where he
helped raise over $3 million to the Obama campaign. On Tuesday, Clinton
sat down with CNBC and was asked whether President Obama should extend the
Bush tax cuts.


need to do is find some way to avoid fiscal cliff, to avoid doing anything
that would contract the economy now, and then, deal with what`s necessary
in the long-term debt reduction plan as soon as they can, which presumably
will be actually Election Day.

UNIDENTIFIED FEMALE: So, does that mean extending the tax cuts?

CLINTON: Well, I think what it means is they will have to extend --
they will probably put everything off until early next year. That`s
probably the best thing to do right now. But the Republicans don`t want to
do that, unless, he agrees to extend the tax cuts permanently, including
for upper income people.

And I don`t think the president should do that. I don`t have any
problem with extending all of it now, including the current spending


HAYES: Those comments became an unwanted distraction for President
Obama. After Republicans ran with the analysis, that Clinton opposes all
of the tax hikes later for the first of the year. The Obama administration
was quick to say there is no daylight between President Clinton and
President Obama when it comes to the desire to extend tax cuts to middle
class and eliminate the tax cut for the rich in the long run.

Clinton agreed that later saying he supports President Obama`s
position and was only underscoring a much bigger analysis of the country`s
upcoming so-called fiscal cliff which essentially consists of a bunch of
measures that would pull a $500 billion out of the economy beginning in


CLINTON: I`m very sorry about what happened yesterday. I was what --
I thought something had to be done at fiscal cliff before the election.
Apparently, nothing has to be done until the first of the year.


HAYES: So, President Obama knows he can call Bill Clinton when he
needs to reach out to voters. Clinton is a gifted politician, the only
Democratic president to win the second term since FDR as he would be the
first to remind you.

He`s become somewhat of a consensus figure within the tent of the
Democrats, but as Hillary Clinton learned in 2008, employing Bill Clinton
as a surrogate also comes with cost. I thought this is an interesting --
so we have this -- before we get into the substance of it, and I want to
talk about -- I want to get to the other flap that happened this week with
Bill Clinton about private equity in Bain Capital and Mitt Romney`s
business record.

But one thought I had watched in this play out and then thinking of
2008 when he caused a lot of headaches for Hillary Clinton, as well, is
that, you know, the modern campaign that the trait that it selects for
above all else is discipline. I mean, when you look at Mitt Romney and
Barack Obama, these are -- whatever -- these are people from very different
worlds and very different (INAUDIBLE).

But they`re both very disciplined individuals. And, it`s a strange
kind of process we run the candidates through which is say the same -- talk
all the time and never say anything noteworthy. That`s your task, if
you`re running for office.

And I wonder if Bill Clinton`s, you know, gas or whatever you want to
call them are an indicator of how much that -- how restrictive this kind of
compulsion towards discipline and the gaffey (ph) nature of campaigns has
changed since his time in 1992.

ALTER: I actually don`t think it`s changed. I mean, I don`t want to
date myself, but this is the 7th or maybe 8th presidential election. And
the press has always been on gaffe control, always been crazed about --
this is an easy kind of reporting to do. You don`t have to dig for
anything --

HAYES: Mitt Romney`s father famously actually was --

ALTER: Right. (INAUDIBLE) but there are literally hundreds of
examples of gaps. Almost none of them except, perhaps, Gerald Ford saying
in October of 1976 that Poland was not under soviet domination so close to
the election, very, very close election that he probably lost to Carter
because of that gap, but the hundreds of others, none have been decisive.

They`re just fodder to the press. And this one was a classic one.
Really, Clinton didn`t really say anything wrong. He`s a little built
rusty. So, you know, he`s political chaps not quite what they used to be.
You got a little tangled up, but you can tell from the end of the sound
bite which Fox cut that he wasn`t actually endorsing Republican position.

HAYES: I think Bill Clinton -- aside from being this sort of, you
know, legendary figure politically, to me, he also perfectly embodies the
contradictions of the modern Democratic coalition. I want to talk about
that after this break.


HAYES: Good morning from New York. I`m Chris Hayes.

Here with Karl Smith, assistant professor of economic and government
at the University of North Carolina at Chapel Hill; Betsey Stevenson,
former chief economist in the Obama Labor Department; Dedrick Muhammad from
NAACP`s economic department; and MSNBC political analyst Jonathan Alter.

So we`re talking about Bill Clinton. We`re talking about the stir
that he created this week. But I thought he had these two moments during
the week, the past week, that, to me, embody the contradiction both of Bill
Clinton and the modern Democratic Party that he has bequeathed to Barack
Obama, in some ways.

Here he is on Piers Morgan with guest host Harvey Weinstein talking
about private equity, and more or less defending the enterprise of private
equity and defending Mitt Romney`s business career.


BILL CLINTON, FORMER U.S. PRESIDENT: If you go in and try and save a
failing compliment, then you and I have friends here who invest in
companies. You can invest in a company, run up the debt, loot it, sell all
of the assets and force all the people to lose their retirement and fire

Or, you can go into a company, have cutbacks, try to make it more
productive with the purpose of saving it. And when you try, like anything
else you try, you don`t always succeed.

I don`t think that we ought to get into the position of where we say
this is bad work. This is good work.


HAYES: So he was making this distinction be bad private equity and
good private equity. But he said, you know, the latter type is good work
and then he went on to refer to Mitt Romney`s business career, sterling.
He used the adjective sterling.

So then, the day before the Wisconsin recall, here he is trying to get
out the vote for challenger, Tom Barrett, who, of course, lost on Tuesday
by seven points. Here he is.


CLINTON: I can just hear it now. Wednesday, all of those people had
poured all of this money into Wisconsin, and if you don`t show up and vote,
we`ll say, "See, we got them now. We`re finally going to break every union
in America. We`re going to break every government in America. We`re going
to stop worrying about the middle class. We don`t get a rip whether poor
people get to work their way into. We`ve got our way now. We`ve got it
all. Divide and conquer works."

You tell them, no.


HAYES: So here`s what I find fascinating. That moment when he says
you and I friends in investing companies to Harvey Weinstein, Bill Clinton
is a wealthy man. And, you know, he represents a Democratic Party that
simultaneously is trying to represent the interest of Bain Capital, of
capita, and the interest of workers.

And, you know, on one day, he`s talking about you and I have friends
that invest in companies. And on the next he`s saying, they`re trying to
beat the middle class. And that to me is the fundamental contradiction of
the modern Democratic Party.

that, Chris, because the investors in Bain are big pension funds, even, you
know, big unions.

HAYES: Right.

ALTER: Churches, big educational institutions. So, the American
economy, the global economy is all tied together. Which side are you on?
Labor or capital? They don`t really apply anymore in the modern world.

It`s much more complicated.

HAYES: Oh, I think they do.

ALTER: No, not -- if you have so many working people whose pensions,
whose retirement is tied up in the success of Bain Capital. They`re in a
position where they need to root for the success of Bain Capital. What you
need -- and this is where Obama is right -- you need rules of the road,
because you cannot have unsupervised capitalism.

And this is the argument that goes back a hundred years, is if you`re
going to have the Bain Capitals of the world, with all these billions of
dollars of flushing around, they have to be very heavily regulated. That`s
the difference between Democrats and Republicans.

HAYES: I take a stronger position in that. I think distribution
matters. And I think if you look at the distribution between capital and
labor, between profits and wages, you have seen that the distribution has
skewed wealth wildly, right?

ALTER: Well, I completely agree with that.

HAYES: And so it doesn`t -- and that matters over the life of
someone, whether you have money that`s in the state pension fund that has
some bit of money in Bain Capital.

ALTER: OK. So, do you want Bain Capital to go away?


HAYES: I don`t know. But --

DEDRICK MUHAMMAD, NAACP: See, what I don`t get is when people were
critiquing and I think if Romney is going to run on his private sector work
on Bain Capital, because he refuses to run on his record as governor of
Massachusetts --

HAYES: Right.

MUHAMMAD: -- and people start critiquing that, then it`s like, no, we
shouldn`t talk about private equity, like we shouldn`t critique it because
it also does good things. No, it`s ironic, it completely is something.

ALTER: I totally agree. It`s just calling card for president. He`s
trying to say elect me because --


HAYES: Broader than that, we should talk about private equity and we
should talk about the way that the locust of power in this economy has
transformed. We should talk about distribution. We should talk about
inequality, not just in quite rooms as Mitt Romney said.

And we should talk about the fact that there is -- that people that
are doing the hiring in this economy, the job creators, and the people that
are taking the profits in this economy, and, again, some of those are
people in the pension funds, right? That`s distributed out.

But let`s remember how wealth is concentrated in this country. It is
not broadly -- it is not broadly distributed. It`s very, very highly
concentrated -- concentrated levels that hasn`t been seen in a hundred

The people on that side of the ledger, on the capital side of the
ledger, are doing much better. And they`ve been doing much better in the
recession and wages meanwhile have stagnated and working people have not.

MUHAMMAD: That`s the fundamental problem of the economy. It`s not
just what the feds are doing --

HAYES: But the Democratic Party can`t talk about that for precisely
the reasons that I`d just soon Bill Clinton or the reason that Jon says.

KARL SMITH, UNIV. OF NORTH CAROLINA: There are two things. I mean,
one, I think that`s not exactly true that capital is doing much better than
labor because -- well, technically, I know this is hard to grasp. But like
the guys who work for Goldman Sachs, those guys are labor.


HAYES: But I`m actually talking about profits versus wages, right?

SMITH: Yes, but profit -- I mean, profits are higher as a percentage,
but it`s not spilling out into --

HAYES: Yes, the profits are higher as a percentage.

SMITH: But profits don`t necessarily go to someone, right? So, what
goes to people are dividends. Dividends are not -- dividends are not
higher than they are.

ALTER: Oh, yes, yes, they are. This is one of the Bush`s big
mistakes, is that the investment in --

HAYES: The amount that you take home, right?

ALTER: -- you know, retraining and all of the kinds of things that
companies should have been investing in, instead, because of the structure
of the 2001 tax cut, it went into dividends. This is one of the huge
mistakes that Bush made with that tax cut.

SMITH: The dividend payout in this country is really small and not
much higher than it was years ago. I think profits are really high mainly
because they`re such huge margins in tech or whatever.

But there`s a deeper issue, which is that, I think you`re concerned
about distribution and about people who are poor.

MUHAMMAD: Or middle class. Or not very rich.

SMITH: But why the solution to that to give poor people money? So if
they don`t have money, so you`re saying we should get rid of Bain Capital,
maybe we should -- why don`t we just give them money?

HAYES: Well, sure. Who`s -- but -- here`s why. Two reasons. I`m
glad you said that.

Fist, we`ve tried that. So, there`s a certain kind of approach to
this which is this very straight forward, redistribution through negative
income tax, earned income tax credit, right? It was Richard Nixon who
floated the guaranteed income which is an idea that`s preposterously
radical in the year 2012, right?

Here`s the problem with just giving them money. I understand the
clean efficiency of it. And I like redistribution. I think I`m fairly
frank on that point, right?

But power matters, too. And the point is that political power that
underpins a system of permanent transfer is completely tenuous. It`s
gossamer thin. You actually have to empower people at the bottom.

You cannot just create a system of rules that just redistributes and
think that that system is going to endure, because it won`t endure. People
have to have viand. It`s precisely the reason that higher taxes and
universal benefits create an enduring political base of support for the
kind of redistribution I`m talking about that simply transfer payments to
the poor do not. I think historic and comparative political economics
bears that out.



BETSEY STEVENSON, WHARTON SCHOOL: And I think there`s a way that you
-- a way that you transfer. And I don`t know exactly, Karl, what you were
trying to imply.

But, I mean, if you look at other countries, other industrialized n
countries, they do it by having a broader safety net. They do it by having
much higher minimum wages. They do it by having a much more progressive
tax system.

And that way of transferring money from rich to poor seems to produce
stable, prosperous economies. I mean, take a look at Australia. I think
their minimum wage is $15 an hour, yet their unemployment is something we
would die to have.

HAYES: Well, they have a central bank that`s very active.


MUHAMMAD: I`m just going to clarify the critique of private equity,
too, because I think to critique private equity and say it might be more of
a destructive thing doesn`t mean necessarily, well, we`re going to get rid
of private equity and give money to poor people. The critique of private
equity is that too oftentimes, it`s destroying middle class jobs.

It`s also a fake thing to say the rich and the poor. No. The bigger
critique of private equity is when it is negative, it can destroy middle
class, working class jobs.

ALTER: So instead of getting rid of Bain Capital, we do need to focus
on it, because Romney is claiming --

MUHAMMAD: But no one is saying get rid of it.


ALTER: This is justification for being presidential. It`s totally
fair game. It`s all fair game in the campaign. So, that`s one point.
Anybody says it`s irrelevant, it`s totally relevant.

HAYES: Agreed.

ALTER: But what we need to do with the Bain Capitals of the world is
make sure that their executives don`t get these obscene payouts and they`re
canceling people`s pensions and throwing hundreds or thousands of people
out of work. That can be done through the law.

HAYES: Right. Hold that thought. Hold that thought.

We`re going to take a quick break. More on this after that.


HAYES: We`re talking about Bill Clinton. We started the conversation
talking about Bill Clinton and the way in which he is a figure represents
the battling interest inside the broad tent of the Democratic coalition.
You know, when he`s raising money, you know, during the week, the same week
that he`s going to Milwaukee to stump for Tom Barrett in the big battle for
unions and the working class against the, you know, billionaires that are
pouring money on the state, he also, and the Democratic Party is raising
money from those hedge funds and raise $3 million.

And, you know, Jonathan, the "which side are you on" kind of analysis
that I was implying, no offense, I disagree. I think -- I think --

ALTER: Well, should there be unilateral disarmament then?

HAYES: No, absolutely not.

ALTER: You`re not going to Wall Street and this --

HAYES: No, no, no. No, I`m not that naive. I understand. I cover
politics. I understand the way it works.

ALTER: The big difference, and I don`t think it`s getting enough
attention, is that Obama has millions of donors. And I think 98 percent
have given less than $250. And the Romney super PACs are 50 or 60 donors.

So we have a few dozen people who are essentially trying to arguably
hijack our political process against millions of donors on the other side.
So, I get annoyed when people are very critical of the Democrats going to
Wall Street. Of course, they have to do that. But that`s not what they`re
relying on.

It used to be 20 years ago, the Democratic Party was reliant on big
donors. They`re no longer 100 percent reliant.

HAYES: Although that may tip, again, depending only how the super
PACs operate, right? I mean, there`s an allied, there`s a super PAC allied
with the president which is called Priorities USA. So far, its fundraising
has been quite lackluster.

ALTER: Yes. It`s not going to change.

HAYES: But the question is, if Sheldon -- you think it`s not going to

ALTER: I mean, it`s possible that George Soros and a few others will
come up with their own super PACs maybe, and Soros is trying to play on the
congressional and Senate gubernatorial elections. But right now, even
Obama`s biggest backers and closest friends are not giving to that super
PAC, to that Bill Burton super PAC. It`s just not happening.

HAYES: Karl?

SMITH: Well, I don`t have something for that.



HAYES: Well done. You want to get back to whether we should ban Bain

The question about the sort of distribution of the fundraising and how
it affects the Democratic Party -- Dedrick, I`m wondering if you think, do
you think the Democratic Party has been vocal enough -- has the president
been vocal enough and Democrats in Congress have been vocal enough around
things like, you know, revenue-sharing and some sort of fiscal stimulus and
the American Jobs Act? I mean, the president did go before Congress and
say, pass this bill. We covered it on MSNBC. He said it 20 times in that
address or something like that.

You know, we end up not covering it because it`s not going to go
anywhere. But that doesn`t mean that there`s not been effort.

MUHAMMAD: Well, and I would, you know, that`s part of a grass roots
organization. I wouldn`t look just for the elected Democrats to be the
ones pushing this. And I think this has to be the grassroots movement. I
think it`s a little built of a problem that you saw in 2008, where you saw
those kind of organized grassroots movement pushing for much more kind of
conservative, radical policies and not enough on the ground for the type of
investments that are needed.

I think the American Jobs Act was a step in the right direction. It
didn`t get anywhere, but I think the idea is if we just leave it alone, no.
We need to get out there and saying, we need this type of -- if you really
want to advance the economy, and that`s why I don`t want to limit
conversations to what the fed is doing or isn`t doing because we need a lot
more than that.

ALTER: See, I`m actually -- want to double down even more on the
American Jobs Act. I think we need a million new you jobs.

MUHAMMAD: That`s right, absolutely.

ALTER: The president has been missing a bet right now. He should go
before the country and say we need a million youth jobs. And they can do
it through AmeriCorps. They approved under the Edward M. Kennedy Serve
America Act in 2009, they approved 250,000. A lot of which hasn`t been
funded, their long waiting list, which is a lot of work to do in this

So a million youth jobs and then another million on top of the million
in the Americans Job Act in public sector, WPA, direct-hiring style jobs.
Republicans won`t like that, but the American people will.

Obama needs to get out front and add a new American renewal jobs

MUHAMMAD: He needs to be out front, I think even ahead Obama. I`m
sorry to be cutting off Betsey.

STEVENSON: You know, the American Jobs Act was something that really
was design to be bipartisan. It didn`t have a million jobs for youth in
it, because no one thought that any Republican would go for a million jobs.

ALTER: Right.

STEVENSON: It was designed to be something that could get Americans
back to work and should, in normal circumstances, have been easily passed
by both parties of Congress.

And, you know, if you -- Mark Zandi scored it at 1.9 -- adding 1.9
million jobs. Almost nothing in that bill aside from the payroll tax cuts
and the extension on unemployment insurance were passed.

Oh, that`s -- you know, I think the estimate, the campaign uses a
million jobs on the table. I think that`s an underestimate, right?
There`s a lot of jobs that were left in the table because it wasn`t -- even
the full payroll tax cut that got passed, none of the support for state and
local governments got passed.

There was so many things in there. None of the infrastructure stuff.
I mean, this was the bipartisan stuff --

ALTER: I want them to put down a marker, forget bipartisanship right
now and say, my second term agenda, this is what I`m running on. It`s not
what might get through Congress in bipartisan way, but this is what we need
to do -- three or four million new jobs, youth jobs, and say what he
actually wants. That`s what an election is for. Not what may be get

STEVENSON: And I think almost every -- there are a large number of
Democrats out there who would support something like a public work`s
project. There`s a lot of work to be done. There`s a lot of people who
can do that work.

But no one`s been willing to talk about it because we know it`s so far
from the center of politics right now.

ALTER: So far the center of politics in Capitol Hill. So what if
it`s DOA, do it anyway, you should do it anyway.

HAYES: Karl?

SMITH: Why don`t -- maybe you can help me with this, Betsey -- so,
why hasn`t there just been more push or why hasn`t the White House said, we
should just have a massive cut. And the Republicans are going to stand up
and say, we don`t want to cut taxes.

STEVENSON: They did.

SMITH: They did for a little bit.


SMITH: But say, you say, we`re going to have to suspend the payroll
tax, employer side and employee side.

HAYES: I think there`s some worry about how that ever gets undone. I
mean, I think there`s already worries about where -- well, sure, but
there`s already worries about where -- we have shown -- let me just say
this -- we have shown a complete inability, politically, to raise taxes in
anyway for any reason for a very long time.

And at a certain point, we`re going to have to raise taxes, I don`t
think we should do it now, but we`re going to have to raise taxes on some
people at some point. And I think there -- you do begin to worry about
what glad path you put us on if you say, oh, let`s have another huge
payroll tax cut, although, that would be the equivalent of a helicopter
drop, which could be financed by the Fed of Ben Bernanke was going to do

MSNBC political analyst, Jonathan Alter, thanks for your time this

ALTER: Thanks a lot, Chris.

HAYES: A new study looks at the way that racial polarization has
affected public opinion in the Obama age. Fascinating, fascinating, draw-
dropping stuff, up next.


HAYES: 2008 presidential election was never supposed to be about race
explicitly. But in some ways, that`s how it turned out.

Barack Obama offered up the hope of transcending our most bitter
divide -- the partisan divide between red and blue and the racial divide
between black and white -- which is why on the night when President Obama
is elected, one of the first things he said was, quote, "Change has come to

Not only did that never happened, but we see corners of American
politics previously untouched by race become racially polarized.

Joining us now is Brown University professor of political science,
Michael Tesler, who has some amazing data that proves this point and shows
how it plays out.

Michael, it`s great to have you here.

MICHAEL TESLER, BROWN UNIVERSITY: Thanks so much for having me.

HAYES: Sasha Issenberg wrote a great piece about this state in play.
I should give him a hat tip because that`s how I found this.

So what broadly does the data show about the relationship between
people`s racial attitudes and their opinion about the president or things
the president proposed?

TESLER: So what we started out looking was just the correlation
between racial attitudes in Barack Obama, how to correlation between racial
attitudes. We measure them in a variety of ways and we get similar results
across the variety of measures we use. And what happened was we started to
see that Barack Obama moves racial attitudes much stronger than previous
presidential candidates.

So that`s a starting point. Racial attitudes were just much more
accessible when it comes to Barack Obama.

HAYES: So they were driving the way people felt about the president?

TESLER: Yes, more so than other, and especially so in the primaries.
So in the general election, it`s a little hard because there`s a lot of
other things that are influencing votes simultaneously. Once you strip
away the primary logo, though, I really came down to racial attitudes in
the primaries, where that I can say a hundred percent was the most
important factor in the primary.

HAYES: That`s an incredibly controversial proposition. You`re saying
that racial attitudes was the driving factor in people`s choice between
Hillary Clinton or Barack Obama.

TESLER: Yes, so racial attitudes have a very strong impact in the
general election. Bu at the end of the day, you have to control for bunch
things and there`s a lot of things --

HAYES: That can overlap, right.

TESLER: But one really pops out in the primaries. And there`s
another book also out of the University of Michigan that argues the same
thing. So, I`m not alone on that one.

HAYES: We have a chart of Hillary Clinton`s support. I think maybe
you can walk us through. It`s a complicated chart, but it`s an amazing --
no, that`s not it. That`s health care and resentment. Since we have that
up, let`s talk about this.

Because one of the points of your research is that not only is it the
case that attitudes towards Barack Obama are very racialized or they`re
being driven by people`s racial attitudes, but now, in the Obama era,
people -- you can predict people`s opinions about policy issues, unrelated
explicitly to race, based on their racial attitudes.

TESLER: So this is probably the most important thing that`s come out
of this line of research that we`ve been doing -- what we call the
spillover of racialization. And what the spillover says is that racial
attitudes are chronically assessable and how I view President Obama. And
then when he gets associated with a policy like health care, what you will
see is racial attitudes come to influence that policy more.

So we`ve done this with a number of policies over time. These are the
same individuals that have been re-interviewed. And we`ve done a number of
panel studies like this. More importantly, though, we`ve also done
experiments where we`ve altered the frame of how it`s worded, were
attributed to President Obama, for instance, the stimulus maybe attributed
to congressional Democrats in one way we frame the question. Or it maybe
attributed to Barack Obama in one way we frame it and racial attitudes are
much stronger predictor when you frame it as Obama`s policy, than when you
frame it as congressional Democrats.

There`s an important caveat to that, though, which is it doesn`t
necessarily make the policy more popular because everybody hates Congress.
It will drive down the rationalization. But it doesn`t necessarily make it
more popular.

HAYES: Let me make sure that I`m tracking this. You have groups of
people. When we talk about racial attitudes, there`s a small battery of
tests that are given in the national election survey which is right out of
Michigan. They`re given quite often.

Here`s an example of the kind of questions that we`re sort of trying
to get at people`s racial attitudes. This is a racial resentment question
posed by U-GOV. It`s really a matter of some people not trying hard
enough. If blacks would only try harder, they could be just as well off as
whites, agree or disagree, right? Fifty-one percent of whites agree with
that, which is I find it concerningly high number, 18 percent of African-

So when you`re looking at people, you kind of give them a racial
resentment score based on the answer of the questions.

TESLER: Yes, there`s four questions. What the questions really do is
they gauge whether you think racial inequality is due to structural
factors, like past discrimination, previous -- current discrimination or
whether they`re due to individual shortcomings.

MUHAMMAD: That`s a question about me because isn`t what`s really just
different here is that we have a black president? I mean, the idea of
racialization of issues. I mean, welfare didn`t always have such a
negative connotation. But then as the welfare reform coming out of the
civil rights movement and welfare reform, sorry, reform that allows more
poor people and minorities to participate in welfare.


TESLER: Well, there`s some great work on this in political science
about how welfare became racialized.

HAYES: Hold that thought for one second. I want to answer that and
talk about health care and what this means for the election in 2012, after


HAYES: We`re talking about -- we`re talking about, Michael Tesler,
political science professor at Brown University, and he`s been doing work
on public opinion in the Obama era and how racial animus can predict or
explain people`s policy opinions on things that don`t, at first blush, have
anything to do or seem to have anything to do with first brace.

Even things like whether you like this dog, right? You ask people --
you show them an example of the president`s dog and you say it`s Ted
Kennedy`s dog. People who have a lot of racial animus are like, yes, I
like that dog. And then it`s President Obama`s dog, with people who have a
lot of racial animus like, I don`t like that dog.

TESLER: So that was a surprising result. I always assume people have
stronger opinions about dogs and politics. So, it might be harder to move
attitudes about looking at Bo Obama, how could you dislike Bo Obama?

HAYES: Incredibly cute. You were making this point before we went to
break about the fact that, you know, we`ve seen -- even before President
Obama, certain issues became racialized in the way that we talk about them
and then they have a connection to racial attitudes. And obviously, there
was a concerted effort I think to racialized welfare, as one example. And
I think the discussion about Obamacare at the margin started to get very
racialized, as well.

TESLER: Yes, I would completely agree. There`s two aspects where
there could -- and this is something I`ve been unable to sort out in the
research. One, just the association with Barack Obama and then, two, also
the frames and connotations that got put on Obamacare, perhaps because of
the association with President Obama.

And that`s what the previous political science research showed on
welfare. It was really about how welfare was framed and was undeserving
poor and undeserving African-Americans. And that`s how --

HAYES: Undeserving read black.

TESLER: And that`s exactly what this research that`s been done by a
Martin Gilens. He`s a professor of political science at Princeton. He
shows this really very convincingly.

MUHAMMAD: And I would wonder -- we were talking earlier about cuts
and states and local government. And that is a place with
disproportionately minorities, African Americans, and women have found some
good middle class jobs and one of that bleeds over into the idea of these
undeserving state workers. The undeserving usually has some type of
connotation of racial minority and others.

STEVENSON: That`s a really important point because the people have
been disproportionately hurt by the cutbacks and government jobs have been
women and minorities.

HAYES: Let me ask you this question because people are going to be
watching. You know, are you saying that people opposed Barack Obama or
opposed the passage of Affordable Care Act are racists?

TESLER: Absolutely not.

HAYES: I want to be clear about what you`re saying and what you`re
not saying.

TESLER: So, that is the problem with this research is that it gets
picked up and it is, if you read the research that it`s become more
racialized, that I`m saying that opponents of Obamacare are racists.
That`s not what I`m saying.

What I`m saying is that the correlation between your racial attitudes
and your support for Obamacare are stronger, or for universal health care
coverage are stronger than they were beforehand. So, that certainly does
mean that everybody who opposes it is racist.


STEVENSON: One way to think about it is that you -- you know,
particularly people who don`t know a lot about what`s in a health care
bill, something`s got to determine whether they`re like or they`re against

HAYES: And people have no real sense of what`s in there.

STEVENSON: And there`s a lot of people who are uninformed about it
and there are things that are going to look silly to us that are going to
be correlated with our preferences over the bill. And that doesn`t
necessarily mean that they`re a racist. It just means that they don`t --
since they don`t really have concrete information, it`s hard for us to
figure out what else is deciding there.

And so, one of the things that we`re talking about during the break is
there a difference between who are uninformed versus not informed? And you
had said that low information voters are ones who are more likely to have
their opinions driven by racial preferences.

TELSER: Or, just an experimental frame. So you framed the policy as
Bill Clinton`s. You framed it as Barack Obama`s. There`s greater impact
of racial attitude.

It`s substantially greater when you frame it as Barack Obama`s and
Bill Clinton. But almost all of that action is coming from people who
score and factual measures of political information.

HAYES: Right. So among the low information, that`s driving it, the
results much more.

MUHAMMAD: And that`s what -- this idea of racial animus or racial
attitudes. It seems to me the lack of information is the structure and
equality we have today, is that those who don`t understand the racial
inequality is due not to just people failing, but due to a long history of
racial inequality that that`s still living today. It`s one of the living
legacy of white supremacy, of racial inequality. Those who don`t have an
understanding, I think, have this negative racial animus you put down.

But I think so many people would take that as, oh, that means
personally, I don`t like black people. I think there`s a lot of people who
might score high on racial animus might have personal problems.

HAYES: Sure. And that`s why these tests are -- the questions are
designed the way they are.

Let`s talk more about this research right after break.


HAYES: Talking to Michael Tesler about how racial attitudes structure
public opinion in the Obama era.

There`s a flip side to this, right? It`s not just that people who
score high on the racial animus test, or I think you called racial
conservatives in your literature are -- their opinions on policy issues
have a lot to do with whether Barack Obama is associated with them or not.
It works in the other direction, which is that the people that you call
racial liberals, which are people who score low on the racial resentment or
more egalitarian, right, more inclined to see structural racism. Their
views on a policy are positively impacted by Obama`s association.

TESLER: Right, so when we look, for instance, in the Bo versus Splash
comparison --

HAYES: Splash being the named of Ted Kennedy`s dog.

TESLER: Yes. So, it`s not just that Bo is less popular among racial
conservatives than Splash. Bo is also more popular than Splash among
racial liberals.

And this is something we saw extremely strong in the primary where
Barack Obama has a 25-point increase in the support from December to March.
And when we looked at that, that is almost completely driven by white,
racial liberals coming into the flock.

HAYES: I think we have a chart from your paper about Hillary Clinton.
And it`s a little confusing. I think you basically need to walk us through
this because the smoking gun is what happens in 2008, right? I mean, you
see a consistency there and basically, my understanding is that when you`re
asking what`s driving people`s attitudes about Hillary Clinton, it`s
ideology and the real resentment which together sort of go hand in hand,
they`re equal drivers of their opinion.

And then all of the sudden, she`s up against Barack Obama. And the
people that don`t like her because they`re conservative still don`t like
her. The people who don`t like her because of racial resentment, all of
the sudden like Hillary Clinton.

TESLER: Right. So there was a turn around in the predictors of
evaluations of Hillary Clinton. And as you can imagine, people who are
liberals and who score low liked Hillary Clinton since she came upon the
scene in 1992. One, once we interviewed another group of people in March,
2008, in the height of her contest with Barack Obama, we see a complete
shift and how people feel about here in the racial resentment coefficient,
where now it`s the racial conservatives who feel more warmly towards here.

And when we re-interviewed about 3,000 of these people in November of
2009, and she`s Obama`s secretary of state, it reverts back to normal.

HAYES: That`s really fascinating.

What implications do you think this has for -- one thing I want you to
answer -- someone on Twitter when I was talking about your research was
saying that you were blaming the president for this state of affairs. That
somehow, the president was mucking everything up in terms of polarization.
Every time he talked about an issue, he would racialize that.

So, I want you to respond to that.

TESLER: Well, I think one of the remarkable things about Barack Obama
and this racialization is how quiet Barack Obama`s been on race.

There`s actually a study right now out of Pennsylvania`s political
science department that`s tracked Barack Obama`s racial rhetoric compared
to previous Democratic predecessors. And Barack Obama actually talks about
race substantially less than previous Democrats.

HAYES: Fascinating.

TESLER: So it`s nothing that Barack is doing.

HAYES: Being Barack Obama as a black man.

MUHAMMAD: I would think it`s remarkable. It makes sense, because the
racialization of having this man being black, that he wants to bring up
race less. And one again, this is an old issue, right? The Democratic
Party has been, for the last four years, hasn`t won, hasn`t had majority of
white voters vote for their candidate. There`s racialization of the
Democratic Party, Obama might be the new piece of that, new height of that.

HAYES: Michael Tesler from Brown University, political scientists,
researcher is really fascinating. Thank you so much.

TESLER: Thanks so much for having me on.

HAYES: Actually, you`re going to stick around actually. You`re going
to stick around for now we know. Don`t go anywhere.

What do we know now that we didn`t know last week? My answer is after


HAYES: Just a moment what we now know that we didn`t know last week.

First, the quick update on the battle between U.S. Department of
Justice and Republican Florida Governor Rick Scott for the state`s latest
attempt to remove people it says are noncitizens from its voting rolls. On
Wednesday Florida Secretary of State Ken Detzner not only refused to stop
the purge, but accused the federal government of violating the
Constitution`s equal protection cause by diluting the votes of its

However, the "Miami Herald" reports that Florida`s 67-county election
supervisors who are responsible for enforcing the purges will not be doing
so now for now because they do not trust the state list. And yesterday,
the American Civil Liberty`s Union sued Florida to stop the purge, saying
it overwhelming targets minorities.

And the personal update, you may have heard me say before, I have a
book coming out on Tuesday. It`s called "Twilight of the Elites: America
after Meritocracy."

It`s about the crisis of authority in American life and the national
mood of distrust of our pillar institutions. It`s available for preorder
at online retailers.

The update is that I`ll be doing two book events in New York City next
week. On Tuesday, I`ll be doing a reading at the Upper West Side Barnes &
Noble, and on Thursday, I`ll be doing another event at the new school. I`m
also doing other appearances around the country. You can find them at or on UP WITH CHRIS HAYES. I love to
see you there.

And if you`re not able to make a person, I`ll be doing a video chat on
Wednesday at noon Eastern Time. And I`ll be taking questions. For
information about how to join in, go to

So what do we know now we didn`t know last week?

Well, we now know that Governor Rick Scott continues to play the rule
of a Lex Luthor-like super villain in Florida, not only purging voters in
defiance of the Justice Department, but also according to "The Huffington
Post," eliminating funding for the Florida Innocence Commission, which is
created by the state Supreme Court after 23 death row inmates and 12 others
accused of serious crimes were exonerated.

We know Florida leads all other states in wrongly condemning people to
death. We know it`s because of systemic errors like those that plagued
Florida that other states are going in a different direction. Connecticut,
New Jersey, New Mexico, New York and Illinois all eliminated the death
penalty in the last five years.

Thanks to the "Guardian" newspaper, we know that while the queen
celebrated her diamond jubilee, the private company in charge of the
security bussed in long-term unemployed job seekers to provide security for
the event, but told them to sleep under a bridge to change into the guard
gear in public, denied them access to private toilets for 24 hours, and
then refused to pay them, saying the job was more like a tryout for an
actual paying job at the London Olympics.

We know that as much we want to believe that such dramatic example of
inequality and exploitation could only occur in a country that still
parades around queens and princes, we know that wage theft in our own
country is endemic. A new study by the Progressive States Network cites
that 2008 survey of workers in large three cities for the national
employment law project which found that 64 percent of low wage workers
experience wage theft each week.

And on average, low wage workers have over $2,500 stolen from their
paychecks per year which amounts to 25 percent of their income.

And finally, we know what the violent core of fascism looks like in
21st century Europe.


HAYES: That was the spokesperson for Greece`s fascist Golden Dawn
party assaulting the members of the left party. We know that after the
station cuts commercial, they tried to shut the man in the video, Elias
Kasidiaris, in a room in the building, but he broke the door and then left.
We know that police pursued him to serve an arrest warrant.

We know that Greece has a bloody history of political violence. And
as slapstick as this affair may seem, it portends bad things for the future
of Greek politics.

I want to find out my guests know now that they didn`t know when the
week began. Let us begin with you Professor Karl Smith.

SMITH: So, I think that we have even more confirmation of this that
the reason 14 million people in America are unemployed is because Ben
Bernanke thinks that the world is better that way. He wants them to be
unemployed. He said as chairman before Congress that he has ways of
reducing unemployment but he`s just not going to use them until we go off
of the fiscal cliff.

HAYES: Do you think it`s because -- this is something that we talked
about in the beginning of the show, do you think it`s because he wants them
to -- because he thinks it is fine that way or he is pressured by other
members of the Federal Reserve board who have voted against him in recent
action and political pressure coming from Ron Paul, and the Republican

SMITH: So, there is pressure, but I mean, I do believe that he has
not used the forces in the way he could and that is a choice that he is
making, and he could push the board in the opposite direction and he`s not.

HAYES: I should note, Karl, that you are not a some sort of namby-
pamby liberal, right? Just so folks understand, where you`re coming from.


HAYES: You`re proudly a center-right economist I think I might say.


HAYES: Betsey?

STEVENSON: So on that theme, I think that what we know now is that
the Fed has been promising us low rates through 2014, and we now know that
is going to expect the economy to stink through 2014, not because they are
making some commitment not the choke off a recovery by raising the rates
too early, but because the economic forecast is because we are not doing so

So what we need is them to actually make that promise that they`re
going to keep rates low and not choke off a recovery and not tell us that
they see bad times ahead.

HAYES: Is there anything that can be done in the short term by the
administration, unilaterally without Congress that could help the jobs
picture? No? I mean, I guess the answer to that is no.

STEVENSON: I think that`s a tough situation. There`s not a lot of
options that, you know, there`s not a lot of options and not a lot of
things that the president can do. I mean, that`s the way that our system
is designed for compromise. And when you have parties, in particular,
right now the Republican Party saying we don`t want to compromise, that`s
basically saying they don`t like the system that the Founding Fathers set

HAYES: Dedrick Muhammad?

MUHAMMAD: What I would like America to know is to know about an
important event. NAACP is coordinating a Father`s Day June 17th, around
stop and frisk. We`re having a silent march on stop and frisk. In 1970,
the NAACP did a famous march on Fifth Avenue. That was to help highlight
the issues around lynching and racial discrimination and we`re just talking
about the racialization of issues.

In the past, it used to be there`s nothing more American than standing
up against unwarranted search and seizure. But in New York City, in
particular, we see that stop and frisk is everyday occurrence, particularly
for African-American, and Latino males. And on Father`s Day, we want to
come forward to say this is something that we don`t tolerate here in New
York City, and across the country.

HAYES: The stop and frisk policy has received a lot of attention and
something that we want to talk about more on the show, because it is really

Michael Tesler, what do you know now?

TESLER: Pew this week released a fabulous 100-plus page report. They
did another interview of the longstanding value study which is to interview
people over the last 25 years. What they found is that partisan
polarization in the mass level is growing pretty substantially across
several different values. So it looks like elite polarization filtering
down to the next level.

HAYES: That`s a really important. We talk a lot about polarization
in the show. We had Mann an Ornstein on the show last weekend, and
asymmetric nature of that polarization which I think is also important to
point out in terms of the way that it`s playing out in Congress.

But it is provoking -- I used to not be like into the people decrying
gridlock and paralysis and dysfunction, but given the economic emergency
that the country finds itself in, it is increasingly maddening.

My thanks to Karl Smith from Modeled Behavior blog on,
Betsey Stevenson, former chief economist of the Obama Labor Department,
Dedrick Muhammad from the NAACP; and Michael Tesler, Brown University
professor of political science thanks for getting UP.

Thank you for joining us today for UP and join us tomorrow, something
morning at 8:00, when I`ll have Patrick Gaspard, the executive director of
the Democratic National Committee and on the Obama campaign strategy.
Until, you can follow us on Twitter @UpWithChris.

Coming up next is Melissa Harris-Perry on today`s "MHP", polls show
that half of Americans know little or nothing about the Mormon church. And
the Mormon faith is having a moment with the Romney as the nominee.

Melissa is going to take a theological, historical and personal look
into the church of Latter Day Saints. She`s got a very close connection to
the church. You`ll find more about that.

Also, the president is worried about Europe and we`re all worried
about the future of America. Do we still believe in American
exceptionalism anyway and as the concept of what it means to be an American
change? And the showdown of the voter purge in Florida.

That`s "MELISSA HARRIS-PERRY" coming up next.

We`ll see you right here tomorrow at 8:00. Thanks for getting UP.


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