RACHEL MADDOW, HOST: Good evening, Lawrence. It`s really, really good to be back. Thank you. It`s been good to see you here in L.A. LAWRENCE O`DONNELL, "THE LAST WORD" HOST: Thanks. MADDOW: Thanks to you at home as well for staying with us for the next hour. We are coming live from Los Angeles tonight. I have to say, it is very, very good to be back from vacation and back at work. On September 29th, 2008, the U.S. House of Representatives took a vote on emergency action to stop the collapse of Wall Street. With Lehman Brothers gone at that point, with Bear Sterns gone, with AIG maybe on the way to gone, with the world`s largest economy teetering on the brink of complete financial collapse, the House of Representatives voted on whether or not to take emergency action to prop it up temporarily, to stop catastrophe. Remember this? The House took a vote on that that day, and what they voted was no. They voted against that emergency rescue plan. And as a result, Wall Street looked like this. (BEGIN VIDEO CLIPS) UNIDENTIFIED MALE: Where do we go from here? UNIDENTIFEID MALE: They don`t have enough. UNIDENTIFIED MALE: We`re going to go down -- ton of uncertainty. UNIDENTIFIED MALE: This has gone down now? UNIDENTIFIED FEMALE: What happened, Steve? UNIDENTIFIED MALE: Find out if it`s possible to change votes, because by my math, this can be bad. I don`t think they can pass it now with the remaining no votes being 17. REPORTER: Wall Street first believed Congress would pass the bailout package, then a wild day of market gyrations before the Dow closed down 777 points, a 7 percent drop. (END VIDEO CLIPS) MADDOW: A 7 percent drop, biggest one-day point drop in the history of the market. That was September 29th, 2008. Again, the context there was that there was a deal on the table to save the economy. The House voted no and that`s how the markets reacted. Well, today, nearly three years later, again, there was a deal on the table to save the economy. This time, Congress voted yes and the markets reacted exactly the same way. (BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: We`ve got about ten minutes to go here before the closing bell and it is a bit of a blood bath. Dow right now down 257 points. UNIDENTIFIED MALE: Maybe Wall Street`s sending a signal to Washington. UNIDENTIFIED FEMALE: Yes. UNIDENTIFIED MALE: Do you think? (END VIDEO CLIP) MADDOW: Today, after Congress voted to raise the country`s debt ceiling and thereby avoid catastrophic national default, the market fell off a cliff. The Dow lost 265 points, its eighth consecutive day in the red and its biggest point loss in month. CNBC does something everyday that they called the heat map for the S&P 500. The S&P 500 is basically an index of 500 of the largest most actively traded companies on the stock market. And this heat map lists all 500 of those companies on one big board, each company represented by a little box. If the box is green, that means the company is up for the day. If the box is red, that means the company is gone. Here`s what CNBC`s heat map looked like today. Yes, it was that kind of day on Wall Street. After the debt ceiling deal got signed, that`s what happened on Wall Street. About 20 little green boxes lost in a sea of about 480 red ones. Everybody`s been talking about how the markets would tank if we didn`t reach a debt ceiling deal, today, we got a debt ceiling deal and the markets still tanked. And the markets tanked because this debt ceiling deal, which was passed today in the Senate and was signed into law by a lonely President Obama, signed into law with nobody standing behind him, this debt ceiling deal is essentially telling an economy that has just been run over by a cover that now, it needs to lay down in the road again so we can back up over it and run it over a second time. The nonpartisan Economic Policy Institute estimated that the debt deal signed into law today will directly cut 325,000 jobs from the economy. It will slow down economic growth by 0.3 percent. That`s just the direct cost of the cuts Republicans forced in this deal. The account for the fact that Democrats also did not use this deal to extend unemployment insurance, like I said they wanted, or the payroll tax cut for middle class people, like they said they wanted to, if you factor in that they didn`t do those two things, which would stimulate the economy, and you factor in those cuts, which are counter-stimulative, then this deal today is estimated to result in 1.8 million fewer jobs in America. It`s estimated to take 1.5 percent off American economic growth. Total growth in the economy right now is only at about 1.3 percent. This deal has the potential to take 1.5 percent off of that, which brings us to negative 0.2 percent economic growth. In other words, heading back into a recession. That is the achievement, the achievement of a deal in Washington that Republicans in Congress were patting themselves on the back about today. (BEGIN VIDEO CLIP) REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: When you look at this final agreement that became here to the White House, you know, I got 98 percent of what I wanted. I`m pretty happy. (END VIDEO CLIP) MADDOW: I`m pretty happy. I`m pretty happy. Speaker John Boehner -- Speaker of the House John Boehner does, in fact, seem pretty happy. The markets are clearly not happy. And the country looking at this deal that may have just taken 1.8 million jobs out of the economy when we`re already in very bad shape is not feeling very happy about it either. Add to this an unhappy warning today from Treasury Secretary Timothy Geithner that even though default was avoided at the very last minute by this make-John-Boehner deal, we are still not out of the woods. We still may get our credit downgraded as a result of this whole mess. Late tonight, the credit rating agency Moody`s announced that the U.S. will retain for now its AAA credit rating but our outlook as country is now listed as negative. (BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In the last few months, the economy`s already had to absorb an earthquake in Japan, the economic head winds coming from Europe, the "Arab Spring" and rile in oil prices, all of which have been very challenging for the recovery. But these are things we couldn`t control. Our economy didn`t need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It`s pretty likely that the uncertainty surrounding the raising of the debt ceiling for both businesses and consumers has been unsettling, and just one more impediment to the full recovery that we need, and it was something we could have avoided entirely. (END VIDEO CLIP) MADDOW: President Obama indicated today that now that this, as he described it, self-created debt ceiling fight is behind us, the White House and Congress, all of Washington, should pivot towards jobs. Now, that this fake crisis is out of the way, everybody can now focus like a laser on the real crisis, the unemployment crisis that`s been hanging around the neck of this country like a lead weight. During his eight-minute in the Rose Garden today, President Obama mentioned jobs. That word jobs, 11 separate times. This morning, before the debt ceiling vote even passed the Senate, the president met with leaders of the AFL-CIO labor union federation to talk about economic growth and putting Americans back to work. Mr. Obama has been pushing for an infrastructure bank. There`s a jobs training bill for Iraq and Afghanistan veterans now working its way through Congress. The only thing that the White House wants to talk about now that the debt ceiling fight is behind them is jobs, J-O-B-S, jobs, jobs, jobs, jobs. Their spin on this debt ceiling deal today, the way they are trying to get people to cover it is by saying now that they have done this, now that they have essentially given Republicans what they wanted, that means they have checked the box on deficit reduction, they have checked the box on giving Republicans what Republicans said they want. And so, now, they are guessing Republicans are going to have to give, what, Democrats some of what they want? If that is what the White House is calculating here, that is not at all how these things work these days. If you are the Republicans, you don`t come out of a negotiation that you just won deciding that you`re going to lose the next one to be fair. And if you`re the Democrats you shouldn`t come out a negotiation you just lost expecting that you`ll win the next one because it`s your turn? People do not take turns in Washington. You do not get concessions from Republicans by giving them what they want. They do not operate on a give-and-take basis. It`s not sharesville. Republicans, for instance, have not said, oh, President Obama, you`ve been so strict in deporting people as president and enforcing border security. Now, we`ll give you that comprehensive immigration reform that you wanted. It doesn`t work that way. President Obama, in fact, became the deportation president. He got really strict on border security. But Republicans still accuse him of being weak on illegal immigration. Weak on border security and hell no, he`s not going to get what he wants on immigration reform. When Republicans attack a Democratic president, politically, they are doing it for a fact. They are not giving an honest analysis of his record. They are throwing epithets. And the epithets are always the same no matter who the president does. Who passed the biggest middle tax cut in the history of the United States? Barack Obama did. It was the stimulus actually. True. When is the last time you heard Republicans credit President Obama for his tax-cutting prowess, his record-breaking tax cutting prowess? Even in these raw political terms, President Obama has to be thinking of not just the health of the country right now, but also the health of his prospects for reelection. He`s currently staring down an unemployment rate of 9.2 percent. And an economy which was already slowing, that`s now about to get hit with this debt ceiling deal that could very well bring the economy to a screeching halt and throw it into reverse. The idea that President Obama has now made Republicans happy by doing this thing and now they will go along with him on creating jobs implies that President Obama now has some sort of leverage and political capital with Republicans going forward. I don`t think that`s true. It also implies that Republicans share the goal expressed by the White House today of trying to make the economy better. (BEGIN VIDEO CLIP) BOEHNER: When you look at this final agreement that we came to with the White House, you know, I got 98 percent of what I wanted. I`m pretty happy. (END VIDEO CLIP) MADDWO: Joining us now is Democratic Congressman Peter Welch of Vermont. Congressman Welch voted no on the debt ceiling bill that passed the House last night. Congressman Welch, thanks very much for your time. It`s nice to have you here. REP. PETER WELCH (D), VERMONT: Good to be here. MADDOW: Why did you vote no on this deal? WELCH: This is a job-killing budget deal. It`s plain and simple. There`s two problems of it. One is policy and one is politics. On a policy level, what we`ve done is absolutely gone into contraction. I mean, this is all cuts. It`s no revenues. So, the capacity to build jobs to get our economy moving is limited very dramatically by this agreement. Secondly, on to politics, we`ve passed the Rubicon. We`ve given a tool never before used in this country to a willful minority in the Senate or a willful majority in the House to hold hostage our full faith and credit, our AAA bond rating. That`s very dangerous. Mr. McConnell has already indicated he`s going to use again in 2013. MADDOW: What`s the way back across that Rubicon as it were? What`s the way to take this, I guess this tactic, this sort of brinkmanship off the table? Do you think that between now and when this comes up again in 2013, Democrats should take steps to avoid this type of stand off again? WELCH: Well, we have to. We made a big mistake, Rachel, in December. That`s when the Bush tax cuts expired. And the president wanted to extend them for the middle class, we supported that, but Mr. Mitch McConnell did successfully was hold a ransom, that the only rate he`ll do that is he give the tax cuts to the wealthy. That was $800 billion added to the deficit. And incidentally, we failed at that time. This is political malpractice on our part to get a debt limit extension in order to accommodate that demand that the Republicans made. We got to get a little tougher here, a little more practical and realize the implications of our actions. Second, what we have to do is double down on building jobs. What you`re seeing as a result of this debt ceiling agreement really is not focus on the interest rates, but focus on how this is contracting the economy and the markets, as you have indicated, greeted this with about a 700-point reduction in the last week. So, the markets are figuring out that a slow economy is probably going to make it tougher for us to pay back our debts. The Democrats have to concentrate constantly, repetitively, consistently, on jobs -- jobs that we can create by rebuilding our infrastructure. It`s a disgrace what`s going on with our roads and bridges. Building and deploying broadband;, having an energy policy that takes advantage of the opportunities to move to a clean post carbon energy economy. These are thing -- and we have to rebuild in our cities and towns our sewer and water systems. These are things that will put people to work. They are visible in the community, and they have a lifetime, a generational return. These are all things that we can do. You know, we have to step back as a country and as a party and say if we have confidence in ourselves and in our future, we`re going to invest in our future and we`re going to do what it takes to put America back to work. We are about the American Dream. We have work to do. MADDOW: That type of spending that you were describing on infrastructure -- those types of investments, even investments in clean energy. Those types of jobs initiatives, investments are not the type of spending plans, not the type of initiatives that Republicans tend to demagogue. Those are things on which you will sometimes get Republicans saying they agree with you, your sentiments there. WELCH: That`s right. MADDOW: Does that mean that it is possible to pass it in Washington right now both through the House and the Senate that would increase our investment, increase spending on the type of infrastructure programs you were just describing? WELCH: Well, basically what we saw today was the ideology of the Tea Party prevailing, very simple, lower taxes for everybody, particularly the so-called job creators, lower spending, and that will build a stronger economy. I mean, that`s a Herbert Hoover philosophy and didn`t work so well last it was tried. The Democrats, I think, have to be more assertive, more self- confident. And there are some Republicans who have come from communities where they have infrastructure issues and they know that their public supports that type of spending. Now, we put some handcuffs on ourselves with this budget agreement, but I think that`s where the Democrats and when we can reach out to Republicans, that`s where we`ve got to concentrate. Americans have -- they will support spending when they know it`s about investing in the future, when generations are going to be benefiting by it. And really it`s a matter after restoration of our own confidence and our ability to move ahead, that the investments that we do will make a difference, that will be beneficial not just to us but to our kids. We`re neglecting that and we`ve got to bring that fight back to rebuilding America. MADDOW: Democratic Congressman Peter Welch of Vermont -- thanks very much for your time, sir. Appreciate the chance to talk with you about this. WELCH: Thank you. MADDOW: For reasons I cannot totally explain, one of the things I do well and often is that I can find dark linings to otherwise silver clouds. Tonight, a departure, a reversal, there may, in fact, be a silver lining to our new anti-spending, growth-killing, deficit-reduction debt ceiling deal. There`s maybe, maybe, maybe, a teeny, teeny, teeny -- something not entirely terrifying to report about it and that is next. (COMMERCIAL BREAK) MADDOW: Before President Obama signed the bill this afternoon that will crash the economy into a big concrete bollard, in order to avoid driving the economy off the cliff altogether, before handing over that ransom for the wounded hostage today, President Obama took time this morning to meet with the AFL-CIO, because, hey, remember, jobs, jobs, jobs. But then after that, President Obama met with our nation`s defense secretary, Leon Panetta. Why the defense secretary? Why today of all days? Because under this debt ceiling deal, defense appears to be the single biggest item slated for cuts, at least maybe for cuts -- both in terms of the short-term and in terms of the cuts that would come into play if Congress doesn`t agree on big generic spending reductions, thus triggering automatic deep cuts. Those could account to about 10 percent of the Pentagon`s annual budget. When President Obama chose Leon Panetta to be his new secretary of defense, not just the CIA director but an old congressional hand who`s seen as being a budget wonk, did the president make that choice of Mr. Panetta in part because he saw changes coming at the Pentagon? Could we actually be changing course on the single biggest thing in American politics that never really gets debated? The single largest chunk of money in American politics and government, the single biggest thing in American government that affects all of our lives and every single thing about the way America is seen around the world but is usually off limits for political debate at home? Could we be changing course on how much America spends on our military? When Ronald Reagan took office, the national debt was about $1 trillion. When he left, it was more than $2.5 trillion. As for the annual deficit, he doubled it. It is not easy to spend that much money. He did it by instituting the largest increases in defense spending ever in our country when we weren`t actively fighting a big war. And those huge increases in defense spending blew everybody`s mind in the 1980s. It was almost impossible to believe how much we increase defense spending under Reagan. But then when the Berlin Wall came down and the Soviet Union fell, everybody thought, OK, Cold War`s over, maybe we`ll have a peace dividend. Maybe now that the Cold War is over, we will stop spending all of this money on defense. But that never really happened on a big scale. We never went back to the way it had been. The skyrocketing Reagan era spending sort of became the new national norm. It went down a little bit through the Bill Clinton presidency, flattened out a bit then. Look what happens after 9/11, though, with the two George W. Bush wars. You got a defense budget that`s doubled. That`s what happens. It`s Reagan bombing the budget to hell all over again, except this time, nobody`s mind is blown. Now, it seems normal, and then, we get to President Obama, supposedly winding down both of those George W. Bush wars. But does that graph look like a war is winding down, ratcheting back defense spending kind of trend? We are still, even now, at previously unimaginable levels of defense spending in absolute terms. The difference between today`s awe-inspiring defense spending and the unimaginable spending of Ronald Reagan is that the amount we`re spending now is no longer unimaginable. Now, it is hard to imagine not spending it. There are two defining features of money and government in our country in this lifetime. It`s the fact that our effective tax rates have come down to a 50-year low and that defense spending in this country dwarves what the whole rest of the world spends on defense. And that spending really cannot be challenged politically here. Those are the defining economic features of American government in this lifetime. America`s spending what the rest of the world spends on defense combined and not debating it at home. That`s what it`s been like my whole life. Could the defense part of that equation finally be beginning to change? Joining us now is Josh Rogin, staff writer for "Foreign Policy Magazine" and the author of the blog, "The Cable." Josh, thanks very much for joining us. Appreciate your time. JOSH ROGIN, FOREIGN POLICY MAGAZINE: Thanks for having me. Welcome back. MADDOW: Thank you. You wrote a piece today. The headline kind of says it all. "Levin and McCain: We Have No Idea How Much Debt Deal Cuts Defense." The top senators in the Armed Services Committee say they don`t know what the defense cuts here are. Is the vagueness of the numbers here intentional, do you think? ROGIN: It`s totally intentional and it`s intentional on all sides, Republicans, Democrats, administration all have a very vested interest in not telling anybody on what defense cuts are in the bill. And there`s a reason. It`s because -- I hate to burst your bubble -- there are no defense cuts guaranteed in this bill. There`s the prospect of defense cuts. There`s the possibility of defense cuts, there`s even the threat of defense cuts. But that doesn`t matter when the rubber meets the road. This is all part of a very long pattern of all the sides in this budget debate claiming to have big savings from cutting defense or getting out of the wars in Iraq and Afghanistan, to portray an image of savings that doesn`t actually force the Pentagon to make hard choices about rolls, admission, or programs, all the things that are wrong in their budgeting and financial system. It`s a shell game. It`s a lot of smoke and mirrors. And what it`s resulted in is actually beginning the discussion about defense cuts, as you rightly mention, which is a huge shift in our political discussion, but it hasn`t resulted in any actual cuts and the details just don`t exist. It`s really amazing. And I think that`s the most interesting thing to me about this, is that what they are sort of setting up in Washington is an opportunity to think about it, if not fight about it. I think the concept is that we`re not yet ready to fight about defense cuts as a country. Neither party is really ready to have that as an argument. But it`s at least time to start mulling it over. And the big cuts that would go into effect if that trigger is pulled - - again, this is months if not years down the road -- those would be cuts that would be significant. Those would be on the order of 10 percent of what the Pentagon has in its yearly budget. Is that trigger simply designed to be scary? Is that never designed to be policy? ROGIN: Well, you`re absolutely right here that it is time to start thinking about it. There`s no way to avoid thinking about it, considering the state of our economy and our fiscal situation. The problem is that if we`re going to have this discussion after decades of not having it, we have to have it honestly based on real numbers and real figures and real tradeoffs. And nobody in this debate is having that debate honestly. I mean, look at the Obama administration. They claim that this deal would cut $350 billion from the defense over the next 10 years? It`s just not in the bill. Harry Reid claimed $1 trillion in savings from drawing down the wars in Iraq and Afghanistan. But we`re going to draw it down anyways. So, that doesn`t really represent any new savings. Paul Ryan did the same exact thing. The trigger thing that you mentioned is the perfect example of this. It`s a threat. It`s meant to be so distasteful as to force Congress to do the one thing they don`t want to do, which is compromise, because if they don`t compromise, defense will be arbitrarily cut at the $600 billion number. But if you look at that threat and if they actually have to implement it, guess who has to decide the details of those cuts? Congress. And not even this Congress, future Congress. And there`s all sorts of games that they could play to make those cuts. And now, let me really blow your mind. That $600 billion cut is based off a fake number. It`s called the CBO baseline. It`s a projection of defense spending that no one ever thought was real. So, it`s conceivable that you could cut billions from the defense budget and the defense budget could still keep rising in real terms. It`s comparing fake numbers against fake numbers so that everybody can claim to be cutting the deficit and cutting the budget when none of that is really going on. MADDOW: It`s like having a pageant that is about a play, that is about a fictional event, that is based on history, in order to talk about what`s going on in current events. It`s a designed to get our minds wrapped around it but it`s not actually rubber hitting the road at this point. Josh Rogin, staff writer for "Foreign Policy Magazine," author of the blog, "The Cable" -- Josh, I really appreciate your help with this. Thanks a lot. ROGIN: Any time, thank you. MADDOW: All right. So, what happens when one giant government freak- out completely dominates the entire news cycle for weeks at a time? What happens? Other crises flourish. While Republicans were barely able to stop themselves from fast-tracking the ruination of the country`s economy on purpose, they were also able to shut down a critical government agency. And as a person who personally has to be on an airplane tonight, I wish they had not done that. That story is coming up. (COMMERCIAL BREAK) MADDOW: Once upon a time, the economy blew up like somebody threw a fragmentation grenade into it. That happened because of wildly irresponsible behavior by Wall Street, a deregulated Wall Street making itself very rich by doing risky things with billions and trillions of dollars with other people`s money. After the immediate crisis, Democrats and Congress passed the Wall Street reform bill. One component of the reform bill they passed was a consumer protection agency for financial stuff. The government had long taken the position that if you buy a toaster or curling iron in the United States, it shouldn`t be one that burns your house down. Advocates like Elizabeth Warren argued successfully that people`s mortgages and student loans and credit card agreements shouldn`t burn you down either. And so, the Consumer Financial Protection Agency was born. Republicans in Congress said they would never let Elizabeth Warren be appointed to run an agency like that. And so, President Obama appointed instead someone who worked with her to set the agency up. Today, Republicans announced they will not let him run the agency either. They will not let anyone run the agency. They will filibuster anyone who the president nominates to run it. And so the president can`t get around the filibuster by appointing someone while the Senate is in recess, Senate Republicans announced today that they will keep the Senate technically in session the whole time they are away until September so there can be no recess appointment, so no one can run that agency. No one at all, because what could possibly go wrong in a financial sector operating without rules? (COMMERCIAL BREAK) MADDOW: Exactly one week from today, Wisconsin will hold what may be the most exciting elections this year, and I say that in full cognizance of the fact the elections I`m talking about here are for six state Senate seats in one upper Midwest state in the middle of August. I love this job. I am so happy to be back. Seriously, though, this is quite excellently interesting. All year, Republicans in D.C. and in the states have been crusading really hard against union rights. Modern conservativism is organically hostile to unions, anybody representing people who work for a living. They like to talk about what they call the job creators, not the job havers. Corporate profits, incidentally, are on track to set a new all-time record this quarter in the United States, even as the rest of our economy tries to decide whether it would prefer to be embalm or cremated. So, calling corporations job creators right now is starting to feel like a little bit of a sick joke. But that is whose side today`s Republicans have taken. And taking that side means trying to eliminate union rights, which makes corporations very happy with the Republicans to whom they have donated and which has the happy political side effect of gutting the best organized, best-funded, most effective political force that typically helps Democrats come election time. In the vanguard state of Wisconsin this year, Republican Governor Scott Walker`s plan to cut union rights led to protests that filled the capital city of Madison for weeks. After those huge protests and some very dramatic political tactics, Scott Walker`s union-stripping bill did become law in Wisconsin this spring. But now, that is baring consequences. Six Republican state senators put up by Wisconsin voters for recall. On Tuesday, a week from today, those six Republican state senators will have to defend their seats in recall elections against bone fide Democratic challengers, which started with protests in February and March is coming down to real voting in August. One group, We Are Wisconsin, which backs the Democratic side in this fight, announced on Friday that it had made more than a million contacts with Wisconsin voters. The next day, a fire destroyed its local office in Lacrosse, Wisconsin. Officials say they do not know what caused that blaze, luckily, nobody was hurt either in the We Are Wisconsin offices or the six adjoining apartments that burned. Today, We Are Wisconsin planned to open shop again at the plumbers and steam fitters local. Also on Saturday, the same day as the fire, a voter in one of the Republican recall districts filed a formal complaint with the Wisconsin`s elections board over a mailer he got from the group Americans for Prosperity. Americans for Prosperity, of course, a very well-funded conservative activist group supported by the oil and chemical billionaire Koch brothers. This was first posted online by Politico.com. It`s an application for an absentee ballot sent by AFP. It says the deadline for voting is August 11th. August 11th is two days after the recall election in the area this mailer was sent. It`s two days too late. The state director for Americans for Prosperity blames all this on a typo. Quote, "This just went out to our members. I`m sure the liberals will try to make a mountain out of a mole hill in an attempt to distract voters` attention from the issues." That`s the explanation from this Koch brothers` Tea Party group -- it only went to the members. Nothing to see here. Move along, mole hill mountain people. But here`s the voter`s formal complaint to the Wisconsin Elections Board, quote, "I believe I was targeted by this group because I am a Democrat and a senior citizen." Wisconsin Democrats are hoping to gain three seats in these recalls, enough to turn the state Senate back from red back to blue. It is worth nothing that Wisconsin voters also put three Democrats up for recall. One of them, Dave Hansen, successfully defended his seat last month. Elections for the other two are a couple of weeks away. But the polls say, really, the action here is with the six Republican state senators who could get the boot. With local races like this, it could be tough to tell how things are playing out. The Web site "Daily Kos" has been posting data from Public Policy Polling showing Democrats with narrow leads in two races and a big lead in one of them. So, there`s that if you`re looking for something to steer by. Also this from Greg Sargent in "The Washington Post" today. The state Democratic Party chairman in Wisconsin today citing internal polls that show Democrats with a lead or a tie in all of next week`s races recalling Republicans, saying all six of those races are eminently winnable. Some of this, of course, is just a political animal barking into the wind. One of the founding laws of politics is that you have to look like a winner before you can be a winner. But we are one week away now, one week away from knowing if Wisconsin Republicans celebrated anti-union rights binge and the pro-corporation, "stick it to working people" budget that went along with it, we are one week from learning whether or not that churned up a lot more than a lot of people`s resentment. In one week, we will find out if it has also churned up a majority of the vote. Joining us now is Wisconsin State Senator Jon Erpenbach, whom we spoke with a lot earlier this year when he and 13 other Democratic state senators left the state in an attempt to halt passage of the union-stripping bill. Senator Erpenbach, it`s good to see you again. Thanks for your time tonight. STATE SEN. JON ERPENBACH (D), WISCONSIN: Good to see you, too, and welcome back. MADDOW: Thank you. Democratic Party chairman in your state says things are going great for your side of things coming up to Tuesday`s elections. What are your expectations for these elections? What do you think is going to happen? ERPENBACH: Well, I tell you what, Rachel? We could win anywhere from two seats to four or five seats, it all depends. It`s very close in three seats and we are ahead in the three other seats. And now, keep in mind: we`re ahead in Republican areas. We are ahead in Republican state Senate seats. Some of these seats have been held by a Republican for over 100 years, not the same Republican, but they`ve been held by Republicans for 100 years. So, just the fact that we`re leading in three of them and it`s a tossup in three other seats it says a lot for what we`re trying to do. MADDOW: In terms of the Democrats who are up for recall, one of those Democrats has successfully defended his seat. We`ve got two more who will be defending themselves against Republican challengers. What do you think about those races? ERPENBACH: We have Bob Wirch in southeastern Wisconsin. And southeastern Wisconsin is pretty good Democratic area. It`s built on labor tradition, goes way back family generations as far as labor families are concern. So, Bob should be in pretty good shape and he`s working really hard. Jim Holperin represents the north of Wisconsin, which is basically northeastern Wisconsin and he`s been working real hard. I`ve been up in his district now four or five times, at events with him and hundreds of people have been showing up at the events, encouraging Jim, telling him he`s doing a great job and he`s working really hard. If we have a close race, it would be that one, but I don`t think we`ll be outworked. So, I think Jim will win. MADDOW: In terms of the rest of the country watching Wisconsin here, I think part of the reason these recall elections are national news is because the Scott Walker and Wisconsin Republicans agenda, this very, very strong anti-union agenda in particular has a lot of national resonance and people are wondering coast to coast if when those politics are upsetting people if that upset is enough to actually flip election results back the other way. And in Wisconsin right now, you guys need to net -- Democrats need to net three seats in order to flip the Senate back to Democratic control. If that happens, what are you going to show the country you want to do with that? What would be the overall open? What would your priorities become? ERPENBACH: That`s a great question. I guarantee, those who are watching closest around the world, around the country, Rachel, are Republican governors and Republican state legislators, because if we do stem the tide here and we`re successful next week, it`s going to send a loud and clear message for those who want to take away workers rights and other things throughout the country, that they are probably going to back down. What we want to do in the state Senate, obviously, is want to try and restore worker`s rights as best as we possibly can. But the one thing we`re going to get out of this is we`re going to be able to show Governor Walker one thing we`ve been trying to do all along, and that`s to sit down and negotiate. Sit down and work out a deal, sit down and compromise. He`ll have to actually sit down and listen to Democrats and their thoughts and their ideas as far as we want to go with the state. So, that will be something new for the governor. So, for the governor, that`s actually probably a positive thing. But one thing we`ll be able to do is we`ll be able to start the ball moving forward, talking about health insurance reform, talking about environmental issues that we want to talk about and obviously talking about restoring worker`s rights. MADDOW: How much did the national winds affect what`s going to happen in Wisconsin right now? I mean, we`re about to talk on the show about how there`s another union rights standoff hat has shut down the Federal Aviation Administration -- that standoff happening in Congress. The news for weeks has been about Washington and the debt ceiling, people raising the prospect that deal that President Obama ultimately had to sign may be so distasteful the Democratic base that Democrats nationally will lose their taste for all sorts of politics. Do you see any of those national winds blowing through Wisconsin? ERPENBACH: Not so much right now, but the Republicans at the national level did the same things that the Republicans at the state level did here. They took what normally is not a controversial move, normally raising the debt ceiling is like a one-sentence bill and it passes, and they loaded it up with agenda items that they want to see. Now, I saw the top of your show, where we`re talking losing some 300,000 jobs just with the president`s signature today. Those are middle class jobs. Those are jobs that the Republican Party at the national level and the state level here in Wisconsin don`t really seem to care about. But as far as what I`m seeing here in Wisconsin from one end of the state and the other is a tremendous amount of passion. People showing up who have never, Rachel, ever been involved in politics before, never worked on a campaign before. They are volunteering. They are phoning. They are going door-to-door. They are passing out leaflets. They`re doing whatever they can. And I`m not kidding when I`m telling you we`re going to have thousands of volunteers throughout the state of Wisconsin over the next week to make sure that we bring home a Democratic majority come next Tuesday night. So, there`s a lot of passion, lot of excitement here in Wisconsin. MADDOW: Jon Erpenbach, Democratic senator from Wisconsin -- we`ve talked to you a lot over the ark of this. I feel like we`re coming to a very important part of this plot. We`re looking forward to continue to talk to you over the next few weeks, sir. Thank you. ERPENBACH: OK. We`ll talk with you soon. MADDOW: Thanks. All right. On "THE ED SHOW" tonight, the congressman who started calling the debt ceiling deal what I think it will forever be called in history now, the man who coined the term Satan sandwich to describe the deal ceiling deal will be a guest on "THE ED SHOW," which starts right after this show. Still to come on this show, "Best New Thing in the World Today" and what Congress did today in trying to kill union and trying to strip union rights that is going to cost us all $30 million a day for the foreseeable future. Details to come. (COMMERCIAL BREAK) MADDOW: So that`s my dad there on the left and his awesome I`m on vacation camouflage straw cowboy hat. That`s me on the right looking like a big goober. Hi, Dad! "Best New Thing in the World Today" has to do with some amazing stuff that happened while I was on vacation. It is now stuff that happened to me. It is stuff that happened to you while I was away. That`s coming up. (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) OBAMA: There`s another stalemate in Congress right now involving our aviation industry, which has stalled airport construction projects all around the country and put the jobs of tens of thousands of construction workers and others at risk, because of politics. It`s another Washington inflicted wound in America. And Congress needs to break that impasse now, hopefully before the Senate adjourns, so these folks can get back to work. (END VIDEO CLIP) MADDOW: These folks are probably not getting back to work. The Federal Aviation Administration, the agency that regulates air travel in our fair nation has been partially shut down. Four thousand people who work there furloughed directly, safety inspectors working without pay. Hundreds of construction projects around the country halted, which means tens of thousands more people idle and no longer working. This has been going on for a week and a half now. We are on day 11 now. Today, we learned that there will be a day 12 of this shutdown, and a day 13 and very likely a day 40, because Congress is now out of session until September. Before leaving town, House Republicans rejected the Democrats compromise deal on a temporary, not even permanent, but a temporary funding extension for this agency. The FAA hasn`t had permanent funding in four years. Congress keeps passing short term funding for it. They`ve done that 20 times. But this, the 21st time, suddenly, we have another manufactured crisis on our hands. Republicans, with the strong encouragement of Delta Airlines, have decided that they will shut down the whole Federal Aviation Administration to try to force Democrats to strip union rights from people who work for airlines or for railroads. Even if they got Democrats in Congress to give them that, that would still be dead on arrival. President Obama said months ago that he would veto anything like that. But that fight, that is what`s keeping the FAA shutdown right now. That`s what 4,000 people furloughed, and tens of thousands of construction workers off of these jobs. (BEGIN VIDEO CLIP) REP. STENY HOYER (D), MARYLAND: Because they passed the bill and said to the United States Senate, either you take it our way or it will be no runway and no highway, and no way. (END VIDEO CLIP) MADDOW: Transportation Secretary Ray LaHood went to New York City`s LaGuardia Airport yesterday to point out the impact of this partial shutdown. He stood in plain view of an old traffic control tower that`s supposed to be demolished by a company based in Brooklyn. The contract to do that demolition work is for about $6 million. A whole bunch of jobs, right? But like the other $2.5 billion worth of improvement projects this one is on hold. Secretary LaHood has said the partial shutdown, however, will not affect airline safety. Amid all the chaos and uncertainty here, though, the FAA did miss a deadline yesterday to publish new safety rules. And to add injury to the existing injurious insult here, in addition to all the people out of work and the work that needs to get done not getting done, this FAA shutdown is also projected to directly cost taxpayers more than a billion dollars. When you buy an airline ticket, you pay tax on that ticket that the FAA collects. Except with no FAA, the government cannot collect that tax. So, the government loses that income. Delta Airlines, the airline lobbying so heavily to strip funding rights in this bill, yes, that Delta Airlines, they were one of the companies that reacted to the accidental tax holiday here by jacking up their prices and pocketing the difference for themselves. So, so far at least, this crisis, this partial shutdown of the FAA, has actually been good for Delta, and for some other airlines. They made more money off each ticket. After some substantial public shaming over this, Delta agreed to refund to its customers those ticket taxes that it had decided to keep for itself. So, in this part of it at least, Delta was shamed into doing the right thing. Shamed into it. Congress so far? Not so much. (COMMERCIAL BREAK) MADDOW: OK. "The Best New Thing in the World Today," this is a sappy one, I`m sorry. I was away for a week and a bit on vacation and then traveling. I`m here at Los Angeles. It is great to be back on the air. I love my job and I`m very happy to be back. If you are a regular viewer of the show, I hope you will not mind the indulgence of me saying that, for me, "The Best New Thing in the World Today" is coming back to work knowing that things here have been in such good hands. Melissa Harris-Perry has not only been a phenomenal guest and contributor on this network, she did such an awesome job hosting this show last week that you would never have known she had never done this before. (BEGIN VIDEO CLIP) MELISSA HARRIS-PERRY, MSNBC CONTRIBUTOR: Where we begin tonight is T minus seven days and counting. Six days to go, and still no deal. Today was a day of pure, ultimately pointless political theater. This is totally 100 percent, a manufactured crisis. The hair on firefight happening in Washington right now is fundamentally a debate over whether or not to destroy the economy. How do you define success? How do you know, for example, if the speaker of the House has been successful? This doesn`t have to happen. The Treasury Department doesn`t have to be put in the position of being the arbiter that gets paid, senior citizens or military veterans. This is an extraordinarily tough job. Thanks to Rachel for letting me sit in. (END VIDEO CLIP) MADDOW: My thanks to Melissa Harris-Perry who did an extraordinary job, especially considering all the breaking news she had to contend with last week, which if you`ve never done a job like this is a whole different fish (ph) from what it`s like if you don`t have breaking news. Melissa is incredible in a very challenging guest-hosting gig here last week. She succeeded beyond all of our wildest dreams. And as for the man who sat in this chair last night, even better news. The wonderful Chris Hayes of "The Nation" magazine and MSNBC, who is so great at one he does, it has just been announced that Chris Hayes, very deservedly, is about to start his own hosting gig at MSNBC. His new weekend show will start on September 17th. It will air on Saturday mornings and Sunday mornings. Don`t worry, there will be still some prison on the weekends. But, now, live, smart, awesome Chris Hayes on both weekend mornings, which is just great. So, huge congratulations both to Chris Hayes and to Melissa Harris- Perry for jobs well done, and accomplishments well-earned. This network also announced today that I will be sticking around here for a long while yet, with colleagues around here like the ones I`ve got. Nothing could make me happier or prouder. I know that it`s all a little indulgent. So, thank for enduring. But for me, it really is "The Best New Thing in the World Today." So, thank you. That`s it. "THE ED SHOW" starts right now. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. END
The Rachel Maddow Show, Transcript 08/02/11
Guests: Rep. Peter Welch, Josh Rogin, Jon Erpenbach