All In With Chris Hayes, Transcript 12/7/2016

Guests: Sheldon Whitehouse, Brian Schatz, Dana Priest, Jeremy Ben-Ami, Michael Lewis

Show: ALL IN with CHRIS HAYES Date: December 7, 2016 Guest: Sheldon Whitehouse, Brian Schatz, Dana Priest, Jeremy Ben-Ami, Michael Lewis

CHRIS MATTHEWS, MSNBC HOST: Thanks for being with us. "ALL IN WITH CHRIS HAYES" starts right now.

(BEGIN VIDEOTAPE)

CHRIS HAYES, MSNBC HOST: Tonight on ALL IN.

DONALD TRUMP, PRESIDENT-ELECT OF THE UNTED STATES: We have some great, great people going to be named over the next couple of days.

HAYES: More generals, more billionaires, and now, after an Al Gore head fake, an EPA pick who wants to gut the EPA.

TRUMP: Department of Environmental Protection, where they`re actually going around and causing damages.

HAYES: Then, new concerns over more conspiracy theories from Trump`s National Security Adviser Michael Flynn. Inside the attacks on Keith Ellison, a declaration of victory in the pretend war on Christmas.

MICHAEL FLYNN, TRUMP`S NATIONAL SECURITY ADVISER: You can say again, Merry Christmas because Donald Trump is now the president.

HAYES: And author Michael Lewis on his new book about how we make decisions and how often we make the wrong one. When ALL IN starts right now.

(END VIDEOTAPE)

HAYES: Good evening from New York. I`m Chris Hayes. In 44 days, Donald Trump will become the President of the United States, and yet today, his views on some of the most important issues he`ll face in the White House are still a moving target. But on climate change, arguably the gravest, most urgent problem of our time, there were glimmers of hope earlier this week. Former Vice President Al Gore, probably the world`s most prominent climate activist, visited Trump Tower on Monday to meet with the President- elect and his daughter Ivanka. And when I spoke with him later that day, he`s take on the meeting was surprisingly optimistic.

(BEGIN VIDEO CLIP)

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: It was a very intelligent exchange. It was a search for common ground, but it`s no secret that Ivanka Trump is very committed to having a climate policy that makes sense for our country and for our world. I appreciate the fact that she is very concerned about this. And I very much appreciate the opportunity I had to have a meaningful and productive conversation with the President-elect.

(END VIDEO CLIP)

HAYES: It was encouraging sign if a somewhat superficial one. Though she`s set to continue running the family business, Ivanka Trump is said to have her father`s ear and his trust. But while it`s been reported, she might use that position to promote the issue of climate change, mitigation, and prevention, the job of overseeing actual environmental policy falls to the administrator of the Environmental Protection Agency or EPA.

So, the President-elect had the opportunity to send a powerful signal with his pick to fill that post, and now he`s done just that. News broke today that Trump plans to nominate Oklahoma Attorney General Scott Pruitt, a climate change denialist with ties to the fossil fuel industry who has sued to block President Obama`s climate agenda at almost every turn.

(BEGIN VIDEO CLIP)

SCOTT PRUITT, ATTORNEY GENERAL OF OKLAHOMA: What the Affordable Care Act was to health care, what Dodd-Frank was to the banking and finance system, the clean power plan is to our power grid and energy in this country. So, this plan, this clean power plan that the president is advancing, through his EPA, is all about an anti-fossil fuel strategy to shut down coal generation and fossil fuel generation and the generation of electricity.

(END VIDEO CLIP)

HAYES: It is hard to imagine a worse choice to head the EPA. Of all of Trump`s troubling cabinet picks, there are a handful and a special category, they`re only hard-right ideological warriors seeming hell-bent on up-ending the very institutions they`re being appointed to serve. You can put Senior Adviser Steve Bannon in that category, along with National Security Adviser Michael Flynn, and Betsy DeVos, Trump`s pick for Education Secretary. Scott Pruitt is every bit as alarming, except in this case, the future of the entire world is at stake, that`s not hyperbole, as former Obama Advisor Dan Pfeiffer tweeted earlier today, "At the risk of being dramatic, Scott Pruitt in EPA is an existential threat to the planet." In Oklahoma, Pruitt`s home state, rejection of climate science is to some degree, part of the course among the republican political class. The State`s Senior Senator James Inhofe, famously brought a snowball to the senate floor last year, supposedly the final proof there`s no such thing as global warming.

Oklahoma has seen a pretty big boom in oil and gas drilling over the past couple of years. And during that same period, the rate of what`s called "induced earthquakes" -- wow, that`s really skyrocketed -- largely caused by drilling wells to store waste water from fracking. In September, Oklahoma registered of record 5.6 magnitude earthquake, even after fracking waste was restricted, prompting the governor to declare a state of emergency in one county. The state was hit by a 3.9 magnitude quake as recently as three days ago. Now, Scott Pruitt, the state`s top Law Enforcement Officer, charged with protecting the people`s interests has been shown to be in league with the oil and gas industry. In 2011, he wrote a letter or sent a letter to the EPA accusing regulators of exaggerating the pollution caused by drilling natural gas wells.

The letter was revealed by The New York Times to have been actually written by lawyers for Devon Energy, one of Oklahoma`s biggest oil and gas companies and delivered to him by Devon`s chief of lobbying. "Outstanding", wrote a company executive, in the letter to Pruitt Office, "Please pass along Devon`s thanks to Attorney General Pruitt."

United States is the world`s second largest emitter of carbon, giving it the power and responsibility to set a course for the rest of the planet, and confronting our most pressing existential threat. But despite the overwhelming scientific consensus on man-made climate change, Pruitt contended in a National Review column, he (INAUDIBLE) last spring, quote, "That debate is far from settled. Scientists continue to disagree about the extent of global warming and its connections to the actions of mankind."

I`m joined now by Senator Sheldon Whitehouse, Democrat from Rhode Island and Senator Brian Schatz Democrat from Hawaii. And Senator Whitehouse, I`ll begin with you. This is been an issue that you had spent a lot of time on in your senate career. Your reaction to this appointment?

SHELDON WHITEHOUSE, UNITED STATES SENATOR: Well, Chris, it`s a sickening and a saddening choice. The individual who President-elect Trump has nominated for this position, is completely in league with the fossil fuel industry, he does their bidding on every single occasion, he repeats their language verbatim, he organizes private meeting, so that his public office can be put to work for this private special interest. It is the biggest and the meanest special interest in Washington. And this man`s purpose in going to the EPA, will be to corrupt that public organization so that it does the bidding of the regulated industry and doesn`t serve the American people. It is a terrible choice.

HAYES: Senator Schatz, there are two -- I think there`s two things, I think, two legacies of the president, this president, the existing president, on climate that seem to me the most important. One is the Paris deal, that John Kerry helped negotiate. And I want to read you or play for you what Mr. Pruitt had to say about the Paris climate deal. Take a listen.

(BEGIN VIDEO CLIP)

PRUITT: The agreement in Paris was just that, an agreement. It wasn`t a treaty. So that he would not have to submit it to the U.S. Senate for ratification. And he brought that agreement back to the United States and said he was going to implement those provisions through the EPA and try to force upon the states. State implementation plans that carried out the elimination of coal and the generation of electricity.

(END VIDEO CLIP)

HAYES: Senator Schatz, do you believe this appointment, if it were -- if the senate were to approve him, would imperil Paris?

BRIAN SCHATZ, UNITED STATES SENATOR: We don`t know yet, but this is certainly a four-alarm fire. This is really the worst case scenario. There were a number of names talked about. None of them were the kinds of people that I would hope would be the administrator of EPA. But this is a person who isn`t just on the wrong side of science, the wrong side of history, but he has made a profession out of climate denial. This is a person who has organized republican attorneys general across the country to undermine the agency that he wants to lead. EPA enforces the Clean Air Act and the Clean Water Act, and this is a person who now wants to lead the EPA, who sued the federal government to try to disallow them from banning pollutants like smog, soot, arsenic and mercury. This is a person who is not qualified to lead the EPA. This is a four-alarm fire for people who care about clean air and clean water.

HAYES: Senator Whitehouse, to what Senator Schatz -- I mean, this is someone who sort of made his bones politically as one of the kind of lead warriors against the clean power plan that was -- that was put through the EPA, that has been caught up in a lot of litigation by republican attorneys general like Mr. Pruitt. What is the fate of that? I mean, that seems -- Paris is one thing, but that seems like it is not long for this world, and if it`s not long for this world, that`s a real problem.

WHITEHOUSE: Well, I think if he is confirmed, administrator Pruitt will find that he has some real problems trying to dismantle the clean power plan. First, a lot of the states are going to go forward on their own. Second, the Supreme Court has already determined that carbon dioxide is a pollutant, so EPA is obliged to do something. And third, there are citizen suit provisions that can force EPA`s hand, but the danger is that you have somebody who is an operative of the fossil fuel industry, who is loyal only to the fossil fuel industry in this job. And in a million smaller ways, he can compromise that agency, he can drive the good and honorable people out of that agency, and what you have here is what I think is becoming a recurring theme in this Trump presidency, which is that the Koch brothers and their operatives are infiltrating the Trump presidency. He won it and they`re going to run it. And they are just inveterate climate deniers and a true menace.

HAYES: Senator Schatz, how hard are you and your colleagues -- you know, there`s two of you right now on my program, how hard are you going to fight?

SCHATZ: This is -- this is absolutely the fight when it comes to climate change. You know, the Paris Climate Agreement, we think will stay in force. The only question when it comes to the international climate change agreement is whether or not the United States abdicates its role and abdicates its leadership. China wants us to abdicate our leadership so they can be the global leader in this important space, but I am more confident on the Paris climate deal than I am about the clean power plan and the ability for the EPA to administer the law. So, we`re going to fight, and I think there is an opportunity, you know, Sheldon and I, worked very hard over the last four years to find common ground and to find a number of republican senators who would occasionally flirt with the truth.

And we were successful in many, many instances. So, really what we need is four or five republican senators to put their country first, to put the next generation first, to put the planet first, and to set partisan politics aside and reject the climate denier. There are a lot of republicans who would say that they are not climate deniers, but here`s the litmus test for them. If you`re not a climate denier, you cannot vote for this administrator of the EPA.

HAYES: All right, Senators Sheldon Whitehouse and Brian Schatz. Gentlemen, thank you both for joining me. I appreciate it.

SCHATZ: Thank you.

WHITEHOUSE: Thank you.

HAYES: Here with me now, Sam Seder, MSNBC Contributor and host of "THE MAJORITY REPORT". And, you know, it`s interesting because there`s a lot of discussion about what the Trump presidency will look like, and a big debate about how much he represents discontinuity or continuity from the Republican Party. And one of the things I always thought was that largely domestic policy was going to be run by the Ryan, Mike Pence, Koch brothers, Heritage, CPAC, part of the conservative movement and the Republican Party, and with Scott Pruitt, Betsy DeVos at education, those particularly -- that seems like that`s what`s happening.

SAM SEDER, MSNBC CONTRIBUTOR AND THE MAJORITY REPORT HOST: Tom Price. Yeah.

HAYES: Yeah, Tom Price, a major (INAUDIBLE) yes, exactly. Yes.

(CROSSTALK)

SEDER: Absolutely, I mean, and the far sort of margins of that.

HAYES: Yeah, I mean --

SEDER: These are people where it`s like, you know, the idea of the fox in the hen house. This is like soaking a lot of cardboard with gasoline and throwing that into the hen house and lighting it on fire. I mean, this isn`t about -- these are people who are put at these agencies to literally undercut the premise of their existence. You have Betsy DeVos who is fundamentally --

(CROSSTALK)

HAYES: -- the school system.

SEDER: No, she`s fundamentally against the idea of public schools. She is against the idea of public school. She`s OK with public education so far as you can take money, and give it to a parochial school.

HAYES: She`s fundamentally --

SEDER: But public school existence, she is against. You have someone here who is against the concept of the Environmental Protection Agency.

HAYES: Who fought a war against the EPA regulating against a pollutant.

SEDER: His campaign co-chair, the last time he ran for re-election, was an oil industry executive. I mean, this guy is on the forefront of destroying. There`s nothing about protecting the environment that this guy is interested in. In terms of health and human services, it is going to just -- they`re just going to sit there and destroy government`s ability to provide through Medicare, through Medicaid --

HAYES: Particularly Medicaid.

SEDER: -- through the Affordable Care Act. I mean -- so, these are people who are to the -- you know, the marginal part of the Ryan party.

HAYES: Yeah, although we should note, all Price -- and then we`re talk about DeVos, Price and Pruitt, all conceivable in a Ted Cruz administration.

SEDER: Without a doubt.

HAYES: I mean -- but here -- now, here`s what I think is distinct about the picture that`s coming into focus of Donald Trump`s nominations for his cabinet. This is a Paul Blumenthal Huff Post reporter. You got billionaire president, education got a billionaire, two billionaires have been appointed to commerce, small business association today -- small business administration Linda McMahon, Connecticut billionaire. And then DOD --

SEDER: Tom Price, I think, is just a millionaire.

HAYES: Yeah, he`s just a millionaire. DOD, DHS and NSA, the National Security Adviser, that`s not the -- that`s not the actual acronym. You got generals -- so, you got -- right now, the biggest you got were the billionaires and generals, which individually, I think actually some of these, you know, I think Mattis is a fairly good pick, all things considered. But when you think about governments that are run by billionaires and generals, you don`t conjure a ton of great historical precedence.

SEDER: No, I mean, it`s -- you know, there`s sort of a childlike quality to the way that Donald Trump is doing this, right?

HAYES: Right.

SEDER: I mean, you would expect sort of like astronauts and then, you know, a police officer or something. You know, from like The Village People or something, but it`s billionaires -- I mean, it gives you a sense of what is his value set here. He -- it is Big Daddy, essentially. People who live fundamentally outside of our society in some fashion. I mean, the military personnel live in a completely different silo of our society where --

HAYES: Well, particularly lifelong generals who have lived their life inside the -- correct.

SEDER: Indeed. And billionaires simply float above everything else.

HAYES: Yeah, they`re in -- they`re in different spaces than the massive civilian society, which in the case of generals can be very useful in certain circumstances. But that`s a good point, these are not people who are sort of in the core of the --

SEDER: Well, the generals at least have an appreciation for things like Medicare, right? They`ve gone through the V.A. system.

HAYES: Right. That`s true.

SEDER: They have an appreciation for sort of what a society is supposed to function as.

HAYES: Yeah.

SEDER: The billionaires simply live outside of it. And you can see that reflected in the other agencies, and so far as they`re going to be essentially gone, you know? And I think you can add, like, things like the SEC to this. They might as well be cafes, people are going to go in, have a cup of coffee, but that`s all that`s going to happen in these places.

HAYES: All right. Sam Seder, thank you very much.

SEDER: Thank you.

HAYES: Still ahead, author of "The Big Short", "Moneyball" and more Michael Lewis, the one and only, is here to talk about his new book, and it is as timely and relevant as anything he has ever written. You don`t want to miss that.

Plus, the Chinese government today rebuked Donald Trump`s pick for National Security Advisor for saying they are allied -- the Chinese, that is, with radical Islam. (INAUDIBLE) who beg to differ. Dana Priest of the Washington Post on the growing concerns over General Michael Flynn`s conspiracy theories about this, after this two- minute break.

(COMMERCIAL BREAK)

HAYES: Trump`s pick for the crucial position of National Security Adviser, Retired Army Lieutenant General Michael Flynn claimed in a book released earlier this year that, quote, "We are facing an alliance between radical Islamists and regimes in Havana, Pyongyang, Moscow, and Beijing.

Today, Chinese Foreign Ministry spokesman Lu Kang pushed back against Flynn`s claim that China is in an alliance with, quote, "radical Islamists" saying he hopes people, quote, "Can make remarks based on solid facts so that bilateral mutual trust can be enhanced."

But solid facts don`t seem to really be Michael Flynn`s thing. Over the course of his career, Flynn has pushed dubious claims, baseless conspiracy theories, and flat-out fake news stories. Just last month, Flynn tweeted out a false story suggesting that Hillary Clinton and her associates have engaged in sex crimes with children.

Today, Flynn met with the woman he`s set to replace in the White House, the current National Security Adviser Susan Rice. A meeting Flynn told NBC news went very well. Maybe. Odds are it was also probably pretty awkward and not just because Trump has vowed to undo much of the current administration`s foreign policy legacy. Unlike Susan Rice, Flynn is a fairly unrepentant Islamophobe, having tweeted that -- and this is what he said, "Fear of Muslims is rational" and characterized Islamism as a cancer inside the entire religion.

(BEGIN VIDEO CLIP)

FLYNN: -- another ism just like we`ve faced Nazism and fascism, and imperialism, communism. This is Islamism, and it is a -- it is a vicious cancer inside the body of 1.7 billion people on this planet. And it has to be excised.

(END VIDEO CLIP)

HAYES: In his book, Flynn described the Muslim world as a, quote, "spectacular failure". Writing, "Can anyone remember the last time a scientist, economist or mathematician in a Muslim country won a Nobel Prize?" This is a Muslim-Turkish scientist, Aziz Sancar. He won a Nobel for chemistry just last year.

Flynn also appears to be very enthusiastic about the prospect of going to war. In the book, Flynn quotes (INAUDIBLE) to argue that public opposition is no reason not to use military power, and claims that we are already engaged in a world war against, quote, "a messianic mass movement of evil people." Flynn writing, most Americans believe mistakenly that peace is the normal condition of mankind while war is some weird aberration. Actually, it`s the other way around.

Joining me now Washington Post Investigative Reporter Dana Priest, who recently wrote a piece for New Yorker on the disruptive career of Michael Flynn. And Dana, I got to say I find Flynn fascinating if for no other reason than the fact that he rose to a very high level within the architecture of the national security state, and then as soon as he got on the campaign trail, tweeted like someone you would find in the comments section of like a right-wing web site. And it`s a little hard to square those two. Can you -- can you help me understand it better?

DANA PRIEST, INVESTIGATIVE REPORTER FOR THE WASHINGTON POST: Yes, yes, I can. He always bucked the system. And General Stanley McChrystal who took Flynn under his wing and promoted him along with him to do some things that really needed to buck the system, to create a special forces unit that could do things never done before. He needed somebody who would, you know, not adhere to tradition. The problem was when he left that cocoon and became the head of the DIA, the Defense Intelligence Agency, he immediately fell, well, on his face. He could not get people to be loyal to him. He had conspiracy theories even then. And then he hooked up with Michael Ladeen, a well-known conspiracy theorist who has very radical views of Islam. And Mike Flynn accepted those views and took them on as his own.

And I guess during the campaign, that is something that they valued. But you would think that now, that would be, you know, somewhat subdued. However, he`s continued to tweet out that he is, you know -- that he`s continued to tweet these conspiracy theories. At least today, when he met with Susan Rice, the National Security Adviser for Obama. You know, he listened to her, which is a -- it would just somewhat of a progress, because the last time he interacted with the U.S. government, it was when Trump was having his initial intelligence briefings and General Flynn kept interrupting so much that Chris Christie had to say, "Let him talk." So, at least he`s, you know, a little bit stood down from that stance. The other thing --

HAYES: Yeah. Please continue.

PRIEST: The other thing I want to point out is since Trump is filling his cabinet with generals, rank matters. And General Flynn has three stars, Mattis and Kelly have four stars. It is not going to happen that they will all of a sudden submit to General Flynn who should be the person who builds consensus, listens to people, and brings a very busy president a consensus view or at least a compact view of different opinions. So, I would expect that there will be, you know, a fair amount of conflict (INAUDIBLE) with Rice was not able to play the traditional national security adviser role of getting people together, getting their opinions into consensus view, because she had very big personalities. And Trump is building a cabinet with very big personalities with a lot of history behind them. So --

HAYES: Yeah. It`s a really important point about how the -- how the sort of national security process works and the key role of the national security adviser as kind of like a point guard, to use a metaphor, right? I mean, there`s -- they are essentially coordinating the various parts of the national security state to try to present the president with options, to sort of take in all the information and listen, and that`s why I thought that this part of your reporting was most troublesome when you said his subordinates started to listen what they called Flynn Facts, things he would say that weren`t true like when he asserted that three-quarters of all new cell phones were bought by Africans or later that Iran had killed more Americans than Al Qaeda. In private, his staff tried to dissuade him from reading these lines. The voracity of the information coming through the channels of this process are extremely important.

PRIEST: Well, that`s true. And the problem is, that fell apart during his only role as a manager at the Defense Intelligence Agency, and now, his role is of a manager and then a manager that gives, you know, filters everything, decides what`s the most important thing for the president to hear and tells him.

HAYES: Yeah.

PRIEST: You know, tells him. But I suspect that this will not be the model that is followed by Donald Trump. I think maybe because he has appointed the generals, he will listen more individually to them, and it`s, you know, yet to be seen what Mike Flynn`s role really will be.

HAYES: That`s a great point.

PRIEST: However, you know, given the fact that he -- they fired his son, hopefully, somebody`s looking more carefully at what General Flynn believes now and what he`s actually promoted through his tweets.

HAYES: All right. Dana, Priest, thanks for your time tonight. I appreciate it.

PRIEST: My pleasure.

HAYES: Still to come, charges of swiftboating in the race for DNC chair, the charges that Keith Ellison is somehow anti-Semitic continue from some quarters ahead. We`ll lay out the facts and tell you how the congressman took a big step today to silence his critics.

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(BEGIN VIDEO CLIP)

TRUMP: We`re going to repeal and replace Obamacare. We have no choice. We have no choice. We have absolutely no choice.

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HAYES: The stakes in the incoming fight over Obamacare are becoming increasingly, urgently clear. A study out today found that repealing a law without a clear replacement risks making 30 million people uninsured. 30 million. And nation`s hospital industry warned that repealing the ACA could cost hospitals $165 billion by the middle of the next decade and trigger, "An unprecedented public health crisis."

Republicans have spent years relentlessly vowing to repeal the law, and soon, they will have the republican president they need to do so. Yesterday, senate republican leader Mitch McConnell said a repeal resolution will be the first item the senate takes up in the new year, but it turns out repealing and replacing the law isn`t as easy as republicans have made it sound. GOP leadership in congress appears to be coalescing around a repeal-and-delay strategy. They vote to repeal the law in January but in reality keep much of the law in place for years while they work on a replacement. The plan isn`t going over well with people like Representative Mark Meadows, a member of the so-called "Hard-right Freedom Caucus" who want the law repealed in full immediately.

The GOP leaders seem to be worried about the political damage that may well result from massively disrupting the health insurance industry and potentially stripping millions of people healthcare coverage. So, they`re preparing to deploy a strategy they`ve used in the past. Set a date in the future for full appeal, call it the Obamacare cliff, when millions will lose their healthcare, and then use the threat of looming disaster to try to extract concessions from democrats on a replacement bill.

(BEGIN VIDEO CLIP)

MITCH MCCONNELL, SENATE MAJORITY LEADER: This has been a very, very controversial law. We have an obligation to the American people to change it and to do a better job. And if we can get democratic cooperation in doing that, that`ll be great.

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HAYES: Charles Schumer, the incoming senate democratic leader said today that he will not assist republicans. "We`re not going to do a replacement," Schumer told The Washington Post. "If they repeal without a replacement, they will own it. Democrats will not then step up to the plate and come up with a half-baked solution that we will partially own. It`s all theirs.

The question of whether or not to cooperate with republicans is probably the biggest issue right now in the Democratic Party. And is a central question in the increasingly nasty fight over who will be the next chair of the DNC. Keith Ellison and the fight for the party`s future, ahead.

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HAYES: Today, Minnesota Congressman Keith Ellison who is running to lead the Democratic National Committee vowed to step down from his House seat if he is elected DNC chair saying the next chair faces a lot of work, travel, planning and resource raising. I will be all-in to meet the challenge.

That would seem to satisfy the one non-ideological criticism of Ellison that the DNC needs a full-time chair, especially as Democrats look to rebound from this election.

But Ellison, the first Muslim elected to congress, has also been subjected to a sustained assault from a small but prominent group of Jewish organizations and donors including Israeli American billionaire and mega- donor Haim Saban who called Ellison an anti-Semite, and the Anti-Defamation League who said Ellison`s past remarks on Israel were disturbing and disqualifying.

The criticism of Ellison includes columns he wrote as a law student in the 1990s defending the Nation of Islam leader Louis Farrakhan as well as helping organize a group for Farrakhan`s Million Man March in 1995.

Ellison later apologized for that support of Farrakhan, writing in 2006, "I have long since distanced myself from and rejected the Nation of Islam due to its propagation of bigoted and Anti-Semitic ideas and statements."

Ellison has most recently being criticized for comments he made to Muslim activists in 2010, allegedly saying U.S. policy is governed by Israel. Audio of that was surfaced last week by Steven Emerson at the investigative project on terrorism, someone who the Southern Poverty Law Center lists as an anti-Muslim extremist.

Congressman Ellison responded to the report saying the sound bite was selectively edited and taken out of context, adding, "my memory is that I was responding to a question about how Americans with roots in the Middle East could engage in the political process in a more effective way. My advice was simply get involved. I believe that Israel and the U.S./Israel relationship are and should be key considerations in shaping U.S. policy in the Middle East."

Well, several prominent leaders and organizations have come to Ellison`s defense, from Senator Chuck Schumer to an Israeli member of parliament as well as several Jewish organizations, including J Street.

And joining me now is Jeremy Ben-Ami, founder and president of J Street, an organization advocating pro-Israel, pro-peace policy in the Middle East.

Jeremy, your reaction to what seems to be a sort of sustained attack on Ellison along these lines.

JEREMY BEN-AMI, FOUNDER, PRESIDENT J STREET: Well, let me say two things. One is on a personal basis that I think it`s really unfair against Keith Ellison who is one of the most tolerant and open minded people that many of us know and who has done a great deal not only in his home community but also nationally to promote dialogue and cooperation across Jewish and Muslim lines. So, just on a personal level I think it`s been unfair and misguided.

But I think more importantly this is part of a pattern where people who stake out positions that are not necessarily in line with old guard pro- Israel advocacy get attacked for being anti-Semitic or anti-Israel in an effort to try to shut down the criticism of the policy. It`s a way to avoid the debate about underlying issues to say well if you`re taking these positions you must be an anti-Semite or anti-Israel and that`s not true.

HAYES: Iis the Anti-Defamation League is wrong when they say his comments are disqualifying?

BEN-AMI: Well, I don`t think it`s disqualifying. I think that they`ve taken it too far. You know, and I think what the Anti-Defamation League and many others are trying to convince people when they make mistakes to learn from those mistakes. And Keith Ellison has done that. He`s apologized and he said he was wrong, to then turn around and 20 years later still attack him for the same things it seems to sort of undercut the whole purpose of trying to educate and move people on these issues. It undercuts the whole premise of advocacy actually.

HAYES: Have Jewish organizations or leaders in his district expressed concern? It seems to me what I`ve heard mostly from those folks is they`re quite pro-Keith Ellison.

BEN-AMI: Right. I think that`s the thing that`s being missed here is the folks who know him the best who are from Minneapolis, who are from Minnesota, people like Al Franken and folks who -- like Sam and Sylvia Kaplan, Sam Kaplan was our ambassador to Morocco and very big supporter of Keith in Minnesota and Jewish and active in the community.

They know him well. And they know that he`s worked in their communities to promote tolerance, to promote coexistence, to promote religious freedom. And I think that they`re missing the point. The people who know him best -- and I`ve traveled with Keith in the Middle East. I`ve traveled with him to Israel and to the Palestinian territory and I`ve seen how much he cares about the Jews and the Palestinians and trying to find a future for both of them. And I think these attacks are just not understanding who the man is.

And I have no dog in this fight for who is chair of the party, but I do have a dog in ensuring that he doesn`t get attacked for things that are not true.

HAYES: I mean, what would it mean for the conversation, particularly within the Democratic Party. I mean, you have Haim Saban saying -- calling him an anti-Semite at the Saban forum. This is someone who is one of biggest donors of Democratic Party politics, massively influential individual. His politics on Israel I think are fair to say ridgedly pro the Israeli government in almost every conceivable way.

I mean, what would it say for the conversation within the Democratic Party if this were to be the thing that caused Ellison not to get this job?

BEN-AMI: Well, I think the important thing about the Democratic Party and a site people should go check out the most recent polls done by the Brookings Institute which put on the Saban forum that show that American attitudes, and particularly attitudes in the Democratic Party are actually shifting in the direction of Keith Ellison, that the types of things that he stands for, which is opposition to Israeli settlement expansion, pro two states, greater U.S. engagement and a stronger role to try to make peace, those are actually growing in support not only in the Democratic Party, across the board in the American public. And I think the Democratic Party is very much going to be the party of the type of policies that Keith Ellison is outlining when it comes to the Israeli/Palestinian conflict in the future.

HAYES: This is a fascinating test in front of the party right now. Jeremy Ben-Ami, thank you for your time. Appreciate it.

BEN-AMI: Thank you very much.

HAYES: All right, still to come my interview with Michael Lewis, best- selling author of "The Big Short" and "Moneyball,"and his phenomenal new book about how even experts get things so wrong, how we all get things so wrong. I`ll talk with him ahead.

Plus `tis the season for a special Thing One, Thing Two coming up next.

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UNIDENTIFIED FEMALE: That`s a pretty serious ho, ho, ho.

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(COMMERCIAL BREAK) HAYES: Thing One tonight, it`s that time of year again, eggnog, mistletoe, colorful decorations and the wild conspiracy theory known on the war on Christmas. If you`re unfamiliar, and I suspect you`re not, it`s a liberal plot to ban the sacred Christian holiday and it`s worse than you thought.

But tonight, good news, reports are coming in that victory has been achieved in the war on Christmas. Last night Donald Trump confidant and former campaign manager Corey Lewandowski brought us the good word.

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COREY LEWANDOWSKI, FMR. TRUMP CAMPAIGN MANAGER: Those are hardworking Americans who are going to be able to keep their jobs here and have a great Christmas where it`s OK to say Merry Christmas again, a great Christmas which you can say again, Merry Christmas, because Donald Trump is now the president. You can say it again. It`s OK to say, it`s not a pejorative word anymore.

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HAYES: Two things to note, one, that guy will probably have a job in the White House soon and two, this is actually something that President-elect Trump peddled during the campaign that it was not OK to say Merry Christmas under President Obama, everyone was forced to say Happy Holidays instead. Could this be true?

We went into the All In video vault to find the evidence of Obama`s eight year long war on Christmas. That`s Thing Two in 60 seconds.

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LEWANDOWSKI: A great Christmas, which you can say again Merry Christmas because Donald Trump is now the president. You can say it again. It`s OK to say. It`s not a pejorative word anymore.

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HAYES: Apparently Corey Lewandowski believes Obama`s war on Christmas is over now that Trump is in. Of course, the idea that President Obama had an anti-Merry Christmas policy clearly sounds like an absurd conspiracy theory.

But we looked into it to see if we can find evidence that the president personally waging this war. A warning, you may find this video Christmasy.

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OBAMA: Have a very Merry Christmas.

We want to say Merry Christmas to everybody.

A very, very Merry Christmas and a holiday filled with joy.

I want to wish every American a Merry Christmas.

Merry Christmas, everybody.

CROWD: Merry Christmas.

OBAMA: So Merry Christmas, everyone.

MICHELLE OBAMA: Merry Christmas.

OBAMA: Merry Christmas, everybody.

Merry Christmas, everybody.

MICHELLE OBAMA: Merry Christmas.

OBAMA: Merry Christmas, everybody.

Merry Christmas, everybody.

Merry Christmas.

Merry Christmas.

Merry Christmas.

Merry Christmas.

Merry Christmas.

Mele Kalikimaka, everybody. Mahalo.

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HAYES: In the wake of Donald Trump`s victory, a lot of people are looking back trying to figure out how it happened. How did so many people not see it coming, or put another way, how can people become so collectively blinded? That theme has been at the center of many best-selling books by one of the most acclaimed nonfiction authors in America, Michael Lewis. In Liar`s Poker, Moneyball and The Big Short, Lewis describes how human beings can collectively misjudge the world and enable those who do it see clearly, a few quirky usually the protagonists in the books, to come in and make big profits and have huge success.

Lewis has now written a book new book that in some ways is both the prequel and summation of those wildly popular books.

His new book is about two brilliant psychologists, Amos Daversky (ph) and Daniel Coniman (ph) who mapped out why it is we, human beings, so often get the world wrong. In The Undoing Project Lewis chronicles their friendship and how they joined the world of ideas forever.

Michael Lewis joins me after the break. Stick around.

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STEVE CARELL, ACTOR: Would you say that it is a possibility or a probably that subprime losses stop at 5 percent? Thank you.

UNIDENITIFIED MALE: I would say that it is a very strong probability indeed. Yes, sir.

CARELL: Zero. Zero. There is a zero percent chance that your subprime losses will stop at 5 percent.

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HAYES: The Big Short, most people missed something that is right in front of their eyes. The subprime mortgage crisis, which led to the 2008 financial meltdown, but a few were able to see it coming. The bestselling author whose books have spawned several feature films joins me now. Michael Lewis. His latest book The Undoing Project: A friendship That Changed Our Minds. It`s great to have you here.

MICHAEL LEWIS, AUTHOR: Happy holidays.

HAYES: Thank you. Happy holidays. I really am a longtime fan of your work. I am a few chapters into this book, which is fascinating for a host of reasons. Why did you write this book about these two academics when I feel like you`re ouvre is stories of people acting in the world, the sort of stories of applied vision. Your now sort of talking about the theoretical foundation.

LEWIS: So had they just been academics, I doubt I wouldn`t have written a book, but they were Israeli academics, so they were mixing it up with the Israeli army constantly. They were on and off the battlefield constantly. They were like a lot of Israeli academics at that time. I think they felt the pressure to be useful and practical. So Danny Coniman (ph) essentially did Moneyball for the Israeli army. He designed the algorithm to choose who would be an officer and who would be a regular soldier and dramatically improved the army.

So they were in the world. But in addition to that, the ideas that had such practical consequence. So, the idea is you trace the ideas into medicine, into law, into sports. I mean, this is the -- Moneyball, I discover after I wrote Moneyball, basically comes from them in a funny way in the sense that you have these baseball players who are being misvalued by professional sports team industry. How does that happen? How do people get misjudged that way? And these guys described the psychology that`s going on in the mind -- what`s going on in the mind -- what`s going on in the mind when people make those sort of misjudgments that were being made that were described in Moneyball.

HAYES: The basic theory here, and it`s so important in the context of thinking about rational humans, right, is that we evolve all sorts of what they call heuristics and biases to deal with this very complex world, which help us usually but then lead to blind spots.

LEWIS: So we -- our mind naturally wants the world to be a more certain place than it is.

HAYES: Right.

LEWIS: Right? That we don`t operate as probabilistic kind of machines. We don`t. Even though we`re often in improbablistic situations.

HAYES: Always in probalistic situations. And instead of actually doing the statistics, what we do as we move through life is tell stories, find patterns. After the fact when we`re wrong we tell a story that explains why we`re wrong and covers up the whole problem.

So these guys were describing essentially the tricks of the --the problems that arise from the way the mind copes with the world. So, a mechanism that`s good for coping with lots of problems also has this error built in. And that`s -- to me that`s the central thing. And that`s the odd thing about this that speak to this moment, the Trump moment.

These guys at the center of their work is the idea that we are fallible, that we are actually kind of wired for certain kinds of mistakes.

HAYES: Systematically fallible.

LEWIS: Systematically fallible. And an awareness of our fallibility is actually part of being human. And actually if we`re going to guard against it, we need to know it. And we have a president who just got elected that prides himself on essentially infallibility and trusts his instinct to an unbelievable degree. And it is really terrifying.

HAYES: You know, I encountered Coniman and Taversky`s (ph) work when I was an undergraduate. I got very obsessed with it. It`s funny, because when you do encounter it, you start to see it everywhere. You see it in yourself.

I mean, I sat at a blackjack table and thought to myself, I`m due. I`m due. And I feel the feeling that I`m due as powerfully as you could feel anything. And I know it`s dumb and totally wrong and I should get up from the blackjack table.

LEWIS: Imagine how you feel after you`ve had a couple of drinks. I know you would know, it`s absolutely right. And people they go with that feeling. They -- anyway, so these mistakes that they kind of -- I feel like them charting in searching for the kind of errors that the mind made, they were actually kind of describing human nature. They were telling us about ourselves in the most beautiful ways, in ways that a novelist might tell you about yourself.

So, that`s what interested me. And I mean, they were -- it was -- it touched every aspect, any sphere of human activity, the mind is involved in everything.

HAYES: They were also -- I mean, they also sort of fascinating relationship, right? So there`s this friendship that`s sort of opposites in different ways, temperamentally.

LEWIS: Very much opposites.

HAYES: That produce this incredible work over this tremendous career.

LEWIS: The book is structured as a love story. I mean, it is a love story. That they both felt different in each other`s company than they felt separately and the work they created together was different than they did apart.

And part of the tragedy of their relationship is the world didn`t want to accept it. That there was the need to know who did what and to apportion credit for the work. And it tore at their relationship.

HAYES: They also -- I mean, this work in many ways the beginning starts as a real sort of affront and challenge to the fundamental framework that, for instance, mainstream economic is built on, right, that humans are rational actors, that they actually do a really good job of calculating everything.

LEWIS: And they`re consistent in their preferences and so on and so forth, and that they don`t -- they understand the choices they`re making. They aren`t responding to this, the description of the choices.

I mean, they did all these studies. I mean, for example, if I tell you, Chris, you have terminal cancer, you`re going to die in seven years but we have a procedure. We can do an operation now. The problem is there`s some risks associated with it. And if I tell you there`s a 90 percent chance you`ll survive this operation, you`re several times more likely to have the operation than if I tell you there`s a 10 percent you are going to die from it, which is the same thing.

HAYES: Literally the same thing. And they show this time and time again.

LEWIS: Amos (ph) shows that doctors are actually -- their judgment is queered by the way the -- by that description. So, you think if that can happen in a life or death situation, where can`t it happen? I mean, the -- I mean, they just showed you what a minefield your mind is. And a mind that generally is pretty well equipped to deal with lots of situations. It generates this error.

HAYES: You know, they start out -- again they sort of build this conceptual framework that is an some ways a sort of attack on some of the foundational assumptions of economics and then ultimately Coniman (ph) ends up winning a Nobel, right?

LEWIS: It is. And no one really pointed out how odd it was for a psychologist to be given the Nobel Prize in economics, especially a psychologist who didn`t even think his work had much to do with economics in the beginning.

In the end he saw that they were -- that one of the implications of this if people could make systematic mistakes, that markets could be systemically wrong, elections could systematically problematic.

And that it had implications, but he crawfished his way into that -- into the Nobel prize. It wasn`t something they were aiming for, even thinking about when they started the work.

HAYES: I feel like this is an intellectual journey for you, too -- 2006, you leave Soloman (ph), you write Liar`s Poker in which in some ways the themes of this book are present there.

LEWIS: Well, absolutely. Among them that how easy it is to -- people`s longing for certainty expresses itself in the financial markets by listening to people`s financial advice that they shouldn`t listen to. And that was my job was to give that advice and seem very sure of myself.

HAYES: Michael Lewis, I have to say as someone who writes nonfiction books, your mastery of craft is incredible and enraging at the same time. And it`s great to have you here.

LEWIS: I don`t have a TV show, so I have time to figure it out.

HAYES: All right. That is ALL IN for this evening. "THE RACHEL MADDOW SHOW" starts right now.

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