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The Rachel Maddow Show, Transcript 12/05/12

Guests: Jan Schakowsky, Felix Salmon, Tony Dokoupil

CHRIS HAYES, GUEST HOST: Good evening, Ed. Thank you. And thanks to you at home for joining us this hour. Rachel has the night off. But happy Wednesday, everyone -- TGIW, am I right? I mean, you know how it is. Things start to wind down on Wednesday afternoon. You send off your last e-mail, maybe pop a beer from the office fridge and head on home for the weekend. All right, you, watching this right now, probably don`t do that. But that`s how your friendly neighborhood lame duck Congress rolls. The House was supposed to be in session tomorrow, was the Republican leadership went ahead and canceled that Thursday session, so it`s Wednesday and the weekend has arrived, if your job title is United States representative. Amid the crush of members heading out of the Capitol building today, you could even spot Republican Congressman Mo Brooks of Alabama biking into his five-day weekend. The House won`t be back in session until Tuesday of next week. But it`s not like they don`t do work over the weekend, super long or otherwise. Many House members will go back home to their districts this weekend where, of course, they`re going to be hearing from their constituents about what we are told are the very important and apparently at the moment stalled negotiations. But in the White House and the House Republican Caucus, over how to -- let`s be sure we`re getting this technically correct -- how to cut the deficit in the medium to long-term so as to avoid an immediate and dramatic cut in the short-term. Yes, that`s right. Now, this may well present a problem for John Boehner`s caucus, because John Boehner sent a letter to the president this week with his own plan, which advocates what just might be the least popular policy in American politics. OK, maybe that`s hyperbole. But just be a tiny bit. I mean, mandatory gay marriage, in which every single married straight person had to immediately divorce their spouse, and accept a state-assigned same-gender spouse to replace them would probably be more popular than what John Boehner proposed this week. What John Boehner is advocating is making Medicare available to fewer Americans. As it happens, there is brand-new polling out today on how Americans feel about the idea of Congress using these deficit negotiations to make cuts to Medicare. Seventy-nine percent of Americans say they do not want Congress to touch Medicare in these deficit negotiations, 79 percent. If you want to get specific about John Boehner`s proposal, what he wants to do to Medicare is to raise the eligibility age from 65 to 67. And as it turns out, there is also recent polling on that specific proposal. And it is also super unpopular. Look at this. Almost 70 percent of Americans say they oppose raising the eligibility age for Medicare. That number is slightly higher among Republicans than it is for the general population. More Republicans oppose John Boehner`s plan than the already extremely high margin of the general public that opposes John Boehner`s plan. Now, if you`re following the news very closely in this slow-motion, Groundhog Day-esque political negotiation, maybe you already knew that John Boehner wants to raise the Medicare eligibility age. But if you just sort of glanced at John Boehner`s actual letter to the president with his proposal for Medicare, you would be hard-pressed to come away with the understanding that that`s what he wants to do, because John Boehner never comes right out and says he wants to raise the eligibility age for Medicare. Instead, he says this, quote, "The House-passed budget resolution assumes enactment of structural Medicare reform that would slow the projected explosive spending growth in this program." What he`s referring to there, when he talks about the structural Medicare reform from the House budget is raising the eligibility age. And rather than taking a hyper-tax, deep footnote approach as he did, he could have just come out and said that. He did not come out and say that, because John Boehner may be many things, but he is not stupid. He understands the bind he is in. His party is ideologically antagonistic to Medicare. And it is also generally funded by lots of people who would like to see Medicare dissolved. And it is also a party that -- get this -- won people on Medicare by 12 points in the last election, even though they lost the election overall by three points. In fact, John Boehner`s cageyness about saying what he actually wants to do is par for the course in this debate. That is actually the norm for the politics of Medicare. And the reason is a deep contradiction at the heart of our national conversation on the issue. Medicare is massively, overwhelmingly popular. It is very successful. And it is, over the long-term, projected to be the biggest contributor to deficits in what`s known as the out-years down the road, which mean people in the country, voters everywhere, love Medicare and do not want it to be cut. And wonks in Washington, D.C. spend their time trying to figure out how to cut Medicare, both Democrat and Republican. And with this very thorny contradiction in mind, politicians and think tank analysts and the like have developed a whole secondary-coated language to talk about Medicare. So premium support instead of privatizing Medicare, and structural Medicare reform instead of raising the eligibility age. Now, remember the context for all this. This is important. Remember that phrase we first started hearing at the start of the health reform debate, which may be apocryphal, but which nonetheless presented themselves as iconic encapsulations of this predicament: "keep government hands off my Medicare." The big Tea Party uprising was in large part a reaction to the idea, quote/unquote, "of socialized medicine." It was the Affordable Care Act, and the government, quote, "takeover of health care," that fanned the flames of the post-Obama Tea Party protest. But, of course, most of the actual Republicans who were actually elected back then were elected because they ran ads like this. (BEGIN VIDEO CLIPS) AD NARRATOR: Congressman Brad Ellsworth said he would protect our seniors. But when he got to Washington, Congressman Ellsworth voted for the largest cuts in Medicare history, over $500 billion. AD NARRATOR: Robin Carnahan supports $500 billion in Medicare cuts, hurting seniors most. AD NARRATOR: Rand Paul doesn`t support higher Medicare deductibles for seniors. Conway distracts with negative ads, to hide his support for Obama care, which cuts Medicare by $500 billion. (END VIDEO CLIPS) HAYES: That was 2010. Fast forward to this year`s election, and the same principle carries through. Each side tried to convince voters that the other guy wanted to take the hatchet to Medicare. (BEGIN VIDEO CLIPS) REP. PAUL RYAN (R), WISCONSIN: The biggest, coldest power play of all in Obama care came at the expense of the elderly -- $716 billion funneled out of Medicare by President Obama. BARACK OBAMA, PRESIDENT OF THE UNITED STATES: My plan`s already extended Medicare by nearly a decade. Their plan ends Medicare as we know it. MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: On Medicare, for current retirees, he`s cutting $716 billion from the program. I can`t understand how you can cut Medicare $716 billion for current recipients of Medicare. JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Look, these guys haven`t been big on Medicare from the beginning. Their party`s not big on Medicare from the beginning. Folks, use your common sense. Who do you trust on this? (END VIDEO CLIPS) HAYES: And so, now, of course, given all the campaign rhetoric coming from both sides, we are on the other side of an election that proved that there is a bipartisan consensus, that it is bad to be the kind of politician that supports cutting Medicare. And even giving that very recent lesson from the election, we are entering a negotiation period where everyone in Washington is trying to figure out how best to cut Medicare. It is pretty weird. And that is not to say that there are not better and worse ways of cutting Medicare. The White House is proposing in its opening offer, cuts of $400 billion to Medicare and other social insurance programs, $40 billion a year. The president`s plan would achieve those cuts mostly through tweaks in the way payments are made to drug companies and health care providers. John Boehner, on the other hand, would cut Medicare by changing who is eligible for it, by making it cover fewer people. So, everyone is trying to make cuts to Medicare. The big sticking point between the two sides is how much, and do you want to make major structural changes to the eligibility of the program. That is, who does it cover, like John Boehner is suggesting, or do you want to keep the program structurally in place, and simply reform payments, like the White House is suggesting? That is the real debate that`s happening right now, though you`d be hard-pressed to figure that out, based on what everyone is saying about Medicare. There is so much obfuscation it is hard to see where the debate actually is. That is where it is. Do we cut eligibility? Do we shrink who the program covers? Do we start to change it so it covers fewer and fewer people every year? Or do we cut payments and reform the payment system? There`s something else that you should really know about this issue and this debate. Right now, the Medicare Trust Fund is projected to be solvent for 12 more years. Now, that might sound really bad. Twelve years is not, of course, a super long time. Does that mean Medicare is in dire straits? No more dire than it has been for a really good chunk of the last 40 years. Check this out. This is a chart of where Medicare solvency was projected at various points over the years, going back to 1970. Look at that. In 1970, it was only supposed to be solvent for two more years. But miracle of miracles, 42 years later, we still have Medicare. At 12 years right now, the Medicare solvency projection is actually doing almost exactly average. It has sometimes been higher than that, particularly in the post-boom years of the early up (ph), but it is often lower than it is right now. And a big reason for that, the reason Medicare looks to be fairly sustainable right now is because we just passed that law. You`ve probably heard of it, called the Affordable Care Act, health reform, Obamacare, which the Republicans, let us remember, fought tooth- and-nail, and which spends most of its infamous 2,000 pages, throwing a whole bunch of different solutions at the actual underlying problem, that is driving the Medicare cost problem, which is the cost of the rise in the growth of health care costs in general. That very controversial bill that the president and Democrat spent just about every last scent of political capital on is designed to change the delivery of health care in all kinds of ways to slow the growth of spending on health care. Almost none of these changes have been fully implemented yet. And that`s what`s going to happen in the next few years. They will be implemented. And rather than waiting until the Affordable Care Act is fully implemented, waiting to see what`s going to work in terms of cutting costs, Republicans are trying to use this prefabricated deficit crisis to start a permanent undoing of the most popular program in America and they`re doing it a month after we had an election in which everyone agreed, Medicare is awesome. Joining us now is Congresswoman Jan Schakowsky, representing Illinois 9th district, former member of the Simpson-Bowles Commission on Fiscal Responsibility and Reform --Congresswoman Schakowsky, thanks so much for talking with us tonight. Really appreciate it. REP. JAN SCHAKOWSKY (D), ILLINOIS: Thanks so much, Chris. HAYES: I find this gap between where the public is and where the budget conversation in Washington is centered really frustrating and mystifying. And so, I would like you to explain to me where you`re coming from, both from the Democratic House Caucus and the Democratic Party. What do you consider bright lines on Medicare? SCHAKOWSKY: Well, you know, when the Republicans talked about cutting $716 billion from Medicare, the key word is really benefits. HAYES: Right. SCHAKOWSKY: We actually made the program better when it comes to seniors, people on Medicare, people with disabilities, but we were able to create efficiencies in Medicare, stop subsidizing private health insurance companies, beefed up the anti-fraud division of Medicare, and cut billions of dollars -- yes, we did, from Medicare. They called it, I heard the clip you played, Mitt Romney say, funneled money out of Medicare. No, that is not true. We made Medicare for beneficiaries better. Of course, the Republicans confused the voters. And you saw that seniors voted by -- you know, I don`t know what the percent is, more for the Republicans. Their campaign of confusion actually did work. But I -- Chris, I think I read differently the Boehner letter about the structural changes that they want to make, meaning the voucher system. Voucher care that they wanted to go back not only to raising the edge of Medicare, but to turn it into a voucher program and turn it over back to the private insurance companies -- a very unpopular, inefficient, bad idea that would cost seniors up to $6,000 more a year to pay for Medicare benefits. HAYES: One of the things I really like about the plan that you put together during the Simpson/Bowles Commission, was that it questioned a lot of the underlying premises that guide the conversation we`re having about fiscal policy right now. And I guess I want to ask you -- given the fact that we have just thrown all these different policy mechanisms at the problem of the growth in health care spending, wouldn`t it make sense to just wait three or four years, look what`s working, and then have this conversation about adjustments we`re going to make long-term to Medicare? I do not understand why in the wake of passing that bill, the obsession with doing something about it right now. SCHAKOWSKY: Well, actually, I think that would be a fine thing to do, but there are other efficiencies that we could make in Medicare right now. We could ask -- we could allow Medicare to negotiate with the pharmaceutical companies, and that would save a good deal of money. Health care, overall, we could have a public option, which actually passed the House of Representatives, which would save another $106 billion over 10 years. We are doing pilot projects that make accountable care organizations get away from fee-for-service for every individual kind of procedure, and pay for outcomes, for making people healthier, preventative services. So I`m really not against those kinds of efficiencies. But asking seniors, whose median income in the United States of America is $22,000 a year, to suggest that they should pay more, or that they should wait two more years. I have people crawling into my office -- HAYES: Yes. SCHAKOWSKY: -- almost, literally, every week, saying, if I only can make it until I`m 65 years old. These are proposals that not only are wildly unpopular, but they make no sense -- HAYES: They`re bad policy. SCHAKOWSKY: -- in terms of efficient health care. HAYES: And they don`t -- and they don`t save a lot of money, I should also note. If cost driving is what you`re -- very quickly, yes or no, do you see raising the eligibility age as a red line? As the thing that if it`s in the deal, you think Democrats should walk away from? SCHAKOWSKY: We should walk away from raising the age of Medicare, absolutely. My sense is that the White House is in -- HAYES: Same place. SCHAKOWSKY: -- exactly the same place. Not supporting it, thank goodness. It`s a very bad and very unpopular proposal. HAYES: Congresswoman Jan Schakowsky of Illinois, thank you very much. SCHAKOWSKY: Thank you. HAYES: All right. Imagine the most valuable coin in the world -- more valuable than the entire economic output of dozens of countries. Now imagine that coin fixing America`s self-imposed political crisis. We dream that dream, next. (COMMERCIAL BREAK) HAYES: Our Constitution and our statutes are extremely explicit and specific about the power to print money. This is not surprising, because - - well, it`s a very important power. And so, you cannot print money and I cannot print money. And Mitt Romney, even though it seems like he used to when he worked at Bain Capital, not even he can print money. No, only the Federal Reserve can print paper money and the secretary of the treasury can mint coins. Not just any coins, there are a number of restrictions. For example, the width of the dollar coin, it has to be 0.043 inches in diameter. "In God We Trust" has to be on there. There are very specific limits on the number and value of the gold coin for treasury secretary he can order up. But one seemingly random but possibly extremely important loophole: making coins from platinum. It turns out that`s pretty much the discretion of the secretary of the treasury. USS Code 51-12 says the secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the secretary, in the secretary`s discretion, may prescribe from time to time. That`s pretty broad. So, according to current existing law, and this is actually true, the government could, for instance, strike a coin tomorrow at the United States Mint at West Point and as long as it was platinum, the secretary of treasury could decree that this new coin was worth $1 trillion. Doing so would solve a really big problem that`s looming on the horizon, because, theoretically, the secretary of treasury could then take the $1 trillion coin, deposit in its account at the Federal Reserve, and use the money to write checks to pay our debts, even if Congress refuses to raise the debt ceiling. Ah, yes, the debt ceiling. Do you remember that awful, awful debate last year over raising it? It was an invented crisis that ended with a compromise no one liked and caused the United States credit rating to be downgraded. (BEGIN VIDEO CLIPS) FEMALE REPORTER: The deadline is getting closer and a deal seems far off tonight. Aides saying no new progress. MALE TV ANCHOR: A little over 72 hours away from the point the nation will be unable to pay all its bills and risk default. MALE REPORTER: After another day of high drama over the debt, the public posturing continued into the night last night. But now as Congress prepares to work through the weekend and those backroom negotiations continue at a furious pace. MALE REPORTER: Despite this bipartisan support for the deal, it`s a deal nobody wants to take credit for. FEMALE REPORTER: President Obama today didn`t praise the deal, only expressed relief. MALE TV ANCHOR: All eyes will be on the stock market tomorrow, after the S&P`s announcement Friday night of the unprecedented downgrade of America`s credit rating. FEMALE REPORTER: Stocks plummeted overnight in Asia, Europe is following suit this morning, as fear dominates Wall Street. Now, the focus turns to the Fed, and investors are hoping for some good news later today, after suffering the worst day in two years. (END VIDEO CLIPS) HAYES: Credit rating agency basically said, we no longer have faith in you, the United States government, because we no longer believe your political system is capable of basic competence, the basic competence necessary to pay your bills. That Republican-made, self-inflicted crisis and the resolution to it created this current man-made self-inflicted crisis that we`re in right now. One we`re lamely calling the fiscal cliff. The way Republicans in Congress and the president solved the debt ceiling crisis was to build this cliff, that we`re now supposedly dangling off of. They invented this deadline we`re up against. The debt ceiling fight was a disaster, and now Republicans, surprise, want to have that fight again. "The New York Times" reports that one idea bouncing around the right side of the aisle is this. The Republicans will extend tax cuts for the middle class, and then when they need to raise the debt ceiling, quote, "demand deep concessions on Medicare and Social Security as a price to raise the debt ceiling." One Republican senator reportedly called the debt ceiling the line in the stand. Now, the odds are pretty close to zero that we mint a $1 trillion coin in order to pay off some of the debt and therefore negate the need to raise the debt ceiling again. But there`s striking movement in the direction of changing the rules so we don`t ever have to fight over this completely unnecessary issue ever again. Remember, this is important. The debt ceiling isn`t about incurring future debt. It`s about the money Congress has already duly authorized and appropriated and voted to spend. It`s not a fight about whether or not to spend money. It`s a fight about whether or not to pay your credit card bill. Today, the president basically said, no more. I`m done having this dumb fight. I am not going to do it again. (BEGIN VIDEO CLIP) OBAMA: I want to send a very clear message to people here. We are not going to play that game next year. If Congress in any way suggests that they`re going to tie negotiations to debt ceiling votes, and take us to the brink of default once again, as part of a budget negotiation, which, by the way, we have never done in our history, until we did it last year, I will not play that game. Because we`ve got to break that habit before it starts. (END VIDEO CLIP) HAYES: Republicans have a debt ceiling fake crisis habit and the president says he`ll break it. And he`s backed up by the treasury secretary and the leader of the Democrats in the House. (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: Do you agree with Alan Greenspan, that we ought to just eliminate the debt ceiling? TIMOTHY GEITHNER, TREASURY SECRETARY: Oh, absolutely. UNIDENTIFIED MALE: You do? Will you propose that? GEITHNER: Well, you know, this is something that only Congress can solve. Congress put it on itself. We`ve had 100 years of experience with it. And I think only once, last summer, did people decide to use it to threaten default on the American credit for the first time in history as a tool for political advantage and that`s not -- that`s not a tenable strategy. UNIDENTIFIED MALE: Is now the time to eliminate it? GEITHNER: It would have been time a long time ago to eliminate it, the sooner the better. REP. NANCY PELOSI (D), CALIFORNIA: I don`t think the debt ceiling has a place in all of this. I think that we continue the McConnell Rule, which says the president sends it over, if two-thirds of the Congress objects, than that is overturned. (END VIDEO CLIP) HAYES: OK. So the McConnell Rule isn`t exactly the super awesome trillion-dollar coin idea that I kind of love, but it`s not half bad. The president has the power to raise the debt ceiling in order to pay for the things that Congress has already agreed to pay for, and if Congress wants to stop it, they need a two-thirds majority to do it. I am generally pretty wary of increases of executive authority and decreases of congressional overnight, but in this case, in the case of the debt ceiling, there`s just no argument for it. The money has already been spent. Congress has already spent it. It`s just a matter of whether or not you pay the bills. And if all else fails, President Obama and Tim Geithner should start deciding whose that is they want to put on the new $1 trillion coin. I vote for John Boehner. (COMMERCIAL BREAK) HAYES: Unlike American colleges and universities, American states are not ranked annually by any national publication for how hard people there party. So we can evaluate, say, the relative raucousness of Michigan State, but not the state of Michigan. That said, two syllables that do not as a rule conjure images of booze-fueled (INAUDIBLE) are U and Tah. That`s the intoxicating irony of this day, December 5th, repeal day, because that`s the day Prohibition ended, with the ratification of the 21st Amendment, and the 35th state to ratify a repeal, the one that tipped the balance back toward legal and available booze was Utah. Good looking out, Provo. December 5th, repeal day, is a thing. The question is, in the year 2091, will December 6th be a thing? Because tomorrow is repeal day too. That story is coming up. (COMMERCIAL BREAK) HAYES: Sheldon Adelson is both a formerly reclusive casino mogul and the newly infamous $100 million bankroller of Republican campaigns and -- thanks to all that giving -- now the world`s biggest mark for hustling Republican consultants. Mr. Adelson is the subject of a big splashy interview today with "The Wall Street Journal" that is chock-full of surprises. Exhibit A, quoting Mr. Adelson, "Look, I`m basically a social liberal. I know no one will believe that." Clearly, he wants you to believe that. He says he believes in stem cell research and abortion rights. Mr. Adelson believes in the DREAM Act for immigration reform. He believes in, this is a quote, "socialized-like health care." "Wall Street Journal" reporting, quote, "He added that he used to be a Democrat, like most Jewish Americans, he noted, until he attended the 1988 Democratic Convention. He said he was appalled at the self-interested politicians he says were all over the place." Just appalled. I`m sure politics and self-interest in the same place. If your irony meter just broke, it is because it appears the same Sheldon Adelson who says he rejected Democratic politics because of self-interested politicians has become the single biggest donor in Republican politics because of -- yes, interest. For instance, Mr. Adelson`s casino company is under investigation by the Justice Department for possible violations of the Foreign Corrupt Practices Act. The Justice Department, of course, is led by an attorney general, chosen by the president, in this case, the same President Obama who Mr. Adelson just spent so much money trying to defeat. Mr. Adelson`s company denies any wrongdoing. And as a very rich man, Mr. Adelson stands to pay a whole, whole lot more in taxes now that Mr. Obama has won a second term. And Mr. Adelson says he intends to double his spending on conservative causes with a particular focus on anti-union measures in the states. Labor unions played a big part in Mr. Adelson`s conversion from Democrat to Republican kingmaker. He fought with members picketing outside his Venetian Hotel in Las Vegas. He tried to fight them in court, until find the Supreme Court declined to take his case. In testimony for the Nevada State Ethics Commission, future Democratic congresswoman and unsuccessful candidate Shelly Berkley said Adelson had told her that, quote, "Old Democrats were with the union and he wanted to break the back of the union. Consequently, he had to break the back of the Democrats." That fight, the war with labor changed Sheldon Adelson from being just another social liberal on the sidelines of Republican politics into Sheldon Adelson, quite social liberal and contributor on an historic scale to Republicans who do not share his social values and this goes to a fundamental truth about the Republican Party. And this goes to a fundamental truth about the Republican Party, which is that the Republican Party in its current incarnation is a coalition between missionaries and mercenaries. The Republican Party is made up of true believers who are really committed to legislating against abortion rights and immigration, and then you have plutocratic donors like Sheldon Adelson, who are committed to their bank accounts and their God-given, unfettered rights to do what they want to their workers and with their money. Joining us now is Felix Salmon, a "Reuters" finance blogger. Felix, it`s wonderful to see you. FELIX SALMON, REUTERS: Great to see you, Chris. HAYES: Felix, as someone who reports on and moves in the circle of extremely wealthy people, this kind of politics struck me immediately as very common. SALMON: Completely typical. I can`t remember the last time, if ever, I`ve met some plutocrat, a rich person who opposes gay marriage. Like Sheldon Adelson said today that he believes in gay marriage. And like, this is -- even David Koch said that he believes in gay marriage. The easy, liberal, verities seem to come very easy to these people, just as long as, you said, it doesn`t impinge on their bank account. HAYES: Right. This is like -- it`s hedge fund liberalism basically. SALMON: Yes. HAYES: The other thing that`s interesting, when you think about where wealthy folks are, particularly with respect to the Obama administration. And we saw all the data this year on Wall Street, the pendulum swinging away from Barack Obama towards Mitt Romney, how much of it is genuine self- interest in the sense of, just something as simple as the amount of taxes they will pay? SALMON: I would say all of it. (LAUGHTER) SALMON: I really would. I would say all of it. The banks have two choices. Four years ago, they had the choice between Barack Obama and they knew exactly who he was going to appoint in terms of people like Tim Geithner and Ben Bernanke. They`ll become continuation of the team which had saved the world from utter financial collapse. And that`s what they knew they need. And John McCain, on the other hand, was running around like a headless chicken, and they were scared, they were petrified he would become president, especially with his vice presidential candidate. So they voted in their self-interest, because they knew that the system needed to be saved. This time, now that the system is saved, they just want to pay less taxes. HAYES: Well, and that gets to this really interesting question of narrow self-interest versus broad self-interest. In the case of Adelson, I think, you know, the amount of taxes we`re talking about, this is really important for people to understand, like when you`re talking these marginal races, this is tens of millions, hundreds of millions of dollars for people. I mean, there`s a ton of money on the table. SALMON: If you`re earning like the president -- if you`re earning $400,000 a year, you`re still paying less than top marginal rates on most of your income. It`s only the last bit. If you`re Sheldon Adelson, you`re paying the marginal rates on basically everything. HAYES: Basically everything. But there`s also the sense in which the self-interest is very narrow, insofar as when you look at corporate profits being in nominal terms the highest they`ve ever been, right? When you talk of, look at the Dow. There`s all sorts of economic indicators about the health of the 1 percent, for lack of a better phrase, that things are going great, right? Why did that not -- why is that not the over-determining driver for their political behavior? SALMON: Because they know that if they elect Romney, that`s not going to come to an end. They`re not going to suddenly -- (CROSSTALK) HAYES: That`s baked into the structure of the American economy? SALMON: They`re being given a choice between an economy which has been fantastic for them. Capital has done really well. Labor has done really badly. They`re giving -- they`re saying, the current situation is great for us. But now, we have two choices, between great and even better. Are and given the choice, they`ll take even better. HAYES: The other part of this that struck me is this sort -- you talk about liberal pieties or whatever, the hatred of unions. I think that people underestimate, don`t get -- and I`ve encountered this in my reporting, how visceral, almost dogmatic, almost religious and ideological, how fervently that belief is and how common that is among people who make a ton of money. SALMON: It`s one of the few times that you find a vague semblance of ideology in these people, because they`re very practical, most of the time. Whatever works in terms of making money is what they`ll all choose. But you`re right, sometimes even when you show them the numbers and say, listen, paying -- recognizing unions, you can be more profitable overall, they don`t like that. HAYES: Felix Salmon, "Thomson Reuters" finance blogger, who will be live blogging in Davos in January, you should check that out -- thanks for your time tonight. SALMON: Thank you. HAYES: Whichever side of the marijuana legalization fight is right about it, we are about to start finding out, as in tomorrow. The laboratories of democracy are cooking up an incredible experiment, after this. (COMMERCIAL BREAK) HAYES: We`ve got a moment of geek with Abraham Lincoln and balloons, straight ahead. (COMMERCIAL BREAK) HAYES: Seventy-nine years ago today, on December 5th, 1933, Prohibition in the United States officially came to an end. What you see here before you are people who seem pretty psyched to have a legal drink to celebrate the fact. Prohibition was a long time in the making and a long time in the unmaking. And both the path to Prohibition and the path out of Prohibition were pioneered in the states. States began prohibiting alcohol before the federal government passed the constitutional amendment to do so. And once Prohibition was the law of the land, through that constitutional amendment, it was actually states that first began breaking that consensus by basically, in opposition to the federal government, essentially legalizing alcohol. There is a similar movement happening now, happening tomorrow, actually. And 50 years from now or 80 years from now, we may look back on December 6th, 2012, on tomorrow, as an equally epochal moment in history of American public policy, as the end of Prohibition 2.0. Tomorrow, Washington state will begin the process of implementing the most liberal marijuana regime in the world, along with Colorado. On Election Day this year, voters in both Washington and Colorado passed ballot initiatives legalizing recreational use of pot. In Washington, as of tomorrow, it will no longer be against the law to have in your possession up to an ounce of marijuana if you are over the age of 21. That happens tomorrow in Washington state. There are many, many unanswered questions as to how this will work in the actual real world, right? Questions the Senate Police Department is trying to answer with its previously lauded for its awesomeness on this show FAQ page called "Marijwhatnow?" But there are many unanswered questions about how this is going to work in Washington. For one, it is still illegal to sell marijuana in the state, but perfectly legal, as of tomorrow, to possess an ounce of marijuana. Going forward, once Washington and Colorado have both fully implemented their laws, and if all goes according to plan, the states will host legalized, regulated marijuana industries -- not just decriminalization, but pot incorporated, licensed by the state and paying taxes to it. This, all while the federal government still views possessing and certainly growing, selling, and distributing marijuana as serious felonies. How`s that going to work is the big question that hangs over whatever celebrations the citizens of Washington might engage in tomorrow. On a side note, tomorrow is also the first day that same-sex couples will be able to get marriage licenses in Washington. Then, on Sunday, they will actually be able to tie the knot. That was another huge stage Washington state voters approved in the last election. If you are betting on how this country will evolve in the next few decades in terms of politics and policy, two safe bets: marriage equality and marijuana. Both of those policies go into effect tomorrow in Washington. The truly fascinating thing here is that starting tomorrow, we will see an abstract debate, an abstract policy discussion that we`ve had for many years. Should pot be legal? How might legalization change society? How might it improve it? We`ll see those questions which have just been debate fodder until now turn into real-life issues that the public and policymakers will be forced to contend with. Tomorrow is the beginning of an amazing national experiment. Joining us now is Tony Dokoupil, senior writer at "Newsweek" and "The Daily Beast," and author of the recent "Newsweek" cover story, "The New Pot Barons." Great to have you, Tony. TONY DOKOUPIL, NEWSWEEK SENIOR WRITER: Thank you for having me. HAYES: All right. So, this is a statement out of the U.S. Attorney`s Office for the western district of Washington, which kind of highlights exactly the issue here. The statement reads, "In enacting the Controlled Substance Act, Congress determined that marijuana is a Schedule 1 controlled substance, regardless of any changes in state law, including the change that will go into effect on December 6th in Washington state," blah, blah, blah. He goes on to say, "basically, members of public are advised to remember it remains against federal law to bring any amount of marijuana on to federal property, including all federal buildings, national parks, forests, military institutions, and courthouses." This is an indicator, right, of what is going to happen when this titanic clash has been set up between the state of Washington, what its voters have duly chosen, and what the federal government says is illegal. DOKOUPIL: Absolutely. That`s either a rogue U.S. attorney or it`s a trial balloon from the Obama administration. And I think more likely, it`s a trial balloon. Because Obama himself has said, look, I`m the president, but I can`t legalize marijuana, because Congress has outlawed it. Either way, it is a trial balloon in the sense that it`s going to have a chilling effect on the evolution of the industry in Washington. I mean, the governor of the state, the regulators, when they get together to hash out the structure of the market, they are conspiring to break federal law. They`re committing a crime. HAYES: Right. So how is that going to play out? In both these states, you have -- you know, basically the law says they`re going to have legalized marijuana growth and distribution and regulate it. Can any of that even take place, unless there is some resolution from the federal government about how they`re going to treat it? DOKOUPIL: I don`t -- I think the state`s going to move forward and wait to hear. They can`t expect any resolution before they move forward. They have one year to do something that no one has ever done, create this unique market. And there are huge unanswered questions, such as, will all potency levels of marijuana be accepted? In Amsterdam right now, they`re talking about banning anything above 15 percent THC, which would wipe out a big part of the current medical market. Will all the edibles be allowed? You know, do we need Rice Krispy Treats and truffles the hot dogs, I mean, everything, really? You know, will felons, will people who have a drug record in their past be able to, you know, transfer that black market experience and make money in this new legal market? All these questions need to be hashed out, and it`s going to be an ugly, messy, infighting-filled process. HAYES: Why is it going to be ugly and messy? DOKOUPIL: Well, because -- well, first of all, there are people within marijuana society/culture who believe this is God`s plant and none of us have any right to regulate it, let alone sell it. They`re going to be set up outside whatever meetings take place in Washington state to hash out the market, banging drums, singing songs. It`s going to be like 1967. And then, there are business people who are interested in creating pa path ways to the biggest profits. That means not the tightest restrictions on advertising, the freest rein of where to be located and the like. HAYES: One -- are there lessons in terms of figuring in what the Obama administration is going to do. And I have to say, it seems like a tough call if you`re the attorney general or the president. I mean, the laws are the laws. Are there things the president could do unilaterally to stop enforcement actions in these states? Would that be legal? Are there indicators of how they`ll act based on how they act with medical marijuana in a state like California? DOKOUPIL: Possibly. So, the green rush that everyone talks about started in 2009 after the Ogden Memo came out and said, look, if you`re in clear and unambiguous compliance with state medical marijuana laws, we`re not going to bust you. Now, of course -- HAYES: This is from the number two at the Department of Justice at the time? DOKOUPIL: Precisely. Right. So, then, everyone was confused because of all the busts in California. Well, California as a state does not have clear and unambiguous laws regarding medical marijuana. So, who`s in compliance, who is not? I don`t know. In Colorado, where there are clear laws, you don`t see those raids -- not in the same way. HAYES: That`s interesting. So, it`s possible that we`re going to see some forbearance on the part of the federal government? DOKOUPIL: Potentially, if Washington moves quickly and sets up a very strict, stringent market. HAYES: Tony Dokoupil, senior writer at "Newsweek" and "The Daily Beast", who`s been doing phenomenal reporting on this issue -- thanks for your time tonight. DOKOUPIL: Thank you. HAYES: A crash course in to how now levitate a meal for a dozen people in a not afraid to be servancy (ph). Moment of geek, up next. (COMMERCIAL BREAK) HAYES: All right. Moment of geek which actually begins with a moment of historical iconography. If Americans are familiar with the phrase Cooper Union, chances are it`s because of this. Matthew Brady`s Cooper Union portrait of Abraham Lincoln. The photograph where he took of Lincoln in a studio in New York City, on the same day that Lincoln gave his Cooper Union address. Lincoln was then-presidential candidate Abraham Lincoln and it`s believed the speech he gave that night to a Republican Party group in which he outlined his speech about slavery, that speech is thought to have helped win Lincoln the Republican nomination and later the White House. This is the building where Lincoln gave that speech, the Cooper Union Foundation Building in the East Village of Lower Manhattan, what is now the administrative building of one of the most affordable colleges in country. In fact, so affordable, it is free. Because the guy who gave Cooper Union its name, Peter Cooper, an industrialist and inventor and onetime presidential candidate himself, Peter Cooper believed that the best education should be accessible to anyone who qualified to get in -- anyone that included women and people of color. The question of whether a student can pay for tuition, well, he thought that should be irrelevant. So, for more than a century now, every student at Cooper Union has received a full tuition scholarship to study disciplines like art, and architecture and engineering, and t one of the best colleges of the country. That`s the vision and the mission and the history of the Cooper Union. In its more recent history, school administrators announced to begin chipping away at that policy. They said they will begin charging tuition for graduate students starting this school year. Undergrads are safe for now but maybe later, the school will start charging tuition for them, too. Just one of many avenues the school said it was taking as it searched for a way out of what it described as a deepening financial hole. Despite the recent financial crisis, though, the Cooper Union has been able to maintain $600 million endowment. It owns the land beneath the Chrysler building, but brings in more income. But the school says it`s operating at a loss and the shortfall has to come from somewhere, including from the students. Never mind what the school`s founder and namesake Peter Cooper said about a free education for every student. If you know anything at all about students, then you know the evolving school tuition policy hasn`t simply been accepted by the student body. They did not just shrug and say, oh, well, before stopping in for a student loan application. Instead, right now, they`re staging a sit-in, of dozens students that barricaded themselves inside an eighth floor room in the clock tower of the school`s foundation building, the very same one where Lincoln spoke on that legendary night. They`ve been there since Monday setting up camp with laptops and hammocks and a new Twitter account. "We`re here, we`re staying, we forgot coffee." They demanded that the school, quote, "publicly affirm its commitment to free education." This morning, another group of students invited themselves to the meeting of the board of trustees so they could take minutes arguing that they needed to be transparency and student involvement. Students all over the world these days are fighting against rising tuition costs. These guys are fighting to remain one of the few colleges in this country that gives every student a free ride. It`s amazing story, and it`s still unfolding tonight. Now, here`s the even better geeky part. We know they forgot coffee, and we`re not sure what can be done about that. But there`s also the question of pizza. These college students going without pizza for a couple of days -- that`s not going to happen. And through a stroke of genius, it hasn`t happened. Last night, a group of Cooper Union alums decided to buy the protestors pizza. But in order to do that, they and the students had to figure out how to get the pizza up to the eighth floor of the clock tower from the outside of the building. And they did it because these are quality engineers and future engineers we are talking about. But it`s not without trial and error. Balloons by themselves did not work very well because you cannot control where the balloons will take the pizza. The wind has a tendency it to take things where it wants. More balloons were successful at carrying a string up to the protestors. They then used the string to build a pulley system to pull pizzas up to the eighth floor. If you don`t keep the box flat, there`s going to be a very pathetic- looking pizza with all the cheese pulling at the box. It doesn`t matter that it`s fancy pizza. So, what`s the solution? Well, of course, counterweights. Ingenious -- balloons plus string plus pulley plus pizza boxes with counterweights to keep them flat equals a delivery of perfect level pizza pie to the student protestors at Cooper Union that not only keeps their bellies well-fed but also keeps their dreams of trying to protect a free college education alive for another day. Pizza pulleys -- tonight`s moment of geek. That does it for us tonight. We`ll see you again tomorrow. And I will see weekend mornings at 8:00 Eastern. This weekend, it`s my great pleasure to welcome the amazing Dan Savidge to talk about gay marriage in Washington. Now, it`s time for "THE LAST WORD WITH LAWRENCE O`DONNELL." Have a great night. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. END