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The Rachel Maddow Show, Transcript 12/07/12

Guests: Peter Orszag, Kenji Yoshino

EZRA KLEIN, GUEST HOST: Good evening, Ed. And thank you very much. And thank you at home for sticking around for the next hour. A dreary December day turned out to be full of news today, including big news out of the Supreme Court, things edging towards the brink all over the Middle East, and one of the coolest pictures ever having a big revival. But we begin with important news out of Washington. For all the squabbling politicians and all the whining pundits, we can announce to you tonight, right here, right now, there`s a budget deal that`s becoming clear. Our long national nightmare might almost -- and I repeat, it`s Washington -- almost be over. Now, this is kind of like one of those kids games where you have to look at a picture that looks like nonsense until your eyes filter out the garbage and you can finally see the sailboat. That`s what`s going on in Washington. You need to filter out all the garbage. Like take yesterday, for example. I don`t usually tune into C-Span 2 for comedy. I tune in because it`s just good television. But the U.S. Senate yesterday lulled, guys, and they were being hilarious about the debt ceiling, which is hard to be hilarious about. Here`s what happened. The White House has been pushing a plan to take control of the debt ceiling away from Congress. That way Congress couldn`t, you know, blow up the world economy for no good reason. It`s like taking the really sharp knife covered in explosives away from a kid who`s been having a lot of temper tantrums lately. It just kind of seems like a good thing to do. The White House calls it the McConnell plan because it`s based on an idea that Senate Minority Leader Mitch McConnell proposed back in July 2011. But even though it is Mitch McConnell`s idea, even though he came up with it, Mitch McConnell is not for it. Mitch McConnell at this point does not support the McConnell plan at all. And he didn`t think Democrats did either. And yesterday he wanted to call their bluff. Now, that is when C-Span 2 suddenly became amazing television. Yesterday afternoon, Mitch McConnell asked the Senate to move to an immediate vote on the McConnell plan. Vote on it now. He figured Harry Reid would back down, to prove that even Democrats don`t like this idea. But Reid did not back down. He doubled down. He said, yes, let`s vote on the plan. But let`s move to an immediate up-or-down vote. No filibuster, no 60-vote requirement, let`s see if it gets 51. And if so, it`s passed. At which point, McConnell, seemingly a little taken aback, kind of filibustered his own bill, that he had just said we needed to vote on. He said, no, if we`re not going to have a 60-vote threshold, there would be no vote at all. So, in the space of a few minutes, Mitch McConnell had moved to vote on the plan, he had gotten his wish and then he launched a filibuster or a 60-vote challenge against a vote that he had asked for. Democratic Senator Claire McCaskill was Senate president at the time. Here was her reaction. (BEGIN VIDEO CLIP) SEN. CLAIRE MCCASKILL (D), MISSOURI: Is their objection to the original request? SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER, Yes, I object. MCCASKILL: Yes, objection is heard. I got whiplash. (END VIDEO CLIP) KLEIN: I got whiplash. That is the world`s greatest deliberative body in action. That is also the kind of thing people who don`t know how to see the sailboat seeing in Washington right now. It is all games the two parties are playing to prove to their base they are pure of ideological faith and really committed to beating the other side to a bloody fight. That`s what they have to do. It`s part of the whole dance. Their base won`t trust them. They won`t buy the final deal if they don`t think their party has fought as hard as they possibly can. But if you watch these games closely, it is easy to get too depressed, that the parties are by in turns (ph) angry, and disappointed and they are petty and inane, and they are sorrowful and they are vengeful. But behind all that, if you filter it out, if you just look at the offers on the table and the counteroffers and in particular, if you look at the red lines that are being proposed by John Boehner and President Obama, if you look at these very closely, a deal is beginning to take shape. Watch this. You remember during the presidential campaign what President Obama used to say over and over again about tax rates? About what his plan was for tax rates? President Obama was crystal clear about what he wanted. (BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I have said that for incomes over $250,000 a year that we should go back to the rates that we had when Bill Clinton was president. I want to reform the tax codes so that it`s simple, fair, and ask the wealthiest households to pay higher taxes on incomes over $250,000. The same rate we had when Bill Clinton was president. We`ve got to ask you and me and the wealthiest among us to go back to the Clinton rates for income above $250,000. (END VIDEO CLIP) KLEIN: The Clinton tax rates, we need to go back to the Clinton tax rates. That is not a generic policy idea. That is really specific. The Clinton tax rate for high income earners was 39.6 percent. That`s what President Obama was calling for during the campaign. That`s still what President Obama is calling for now. But now when you ask him if that`s the red line, if it you ask if he will accept anything else, he doesn`t really answer. (BEGIN VIDEO CLIP) CHUCK TODD, NBC CHIEF WH CORRESPONDENT: Tax rates. Are you -- is there no deal at the end of the year if tax rates for the top 2 percent aren`t the Clinton tax rates, period? No ifs, ands or buts and any room on negotiating on that specific aspect of the fiscal cliff. OBAMA: With respect to the tax rates, I just want to emphasize, I am open to new ideas. I`m not going to just slam the door in their face. I want to hear -- I want to hear ideas from everybody. (END VIDEO CLIP) KLEIN: That is not a no. Here is the Treasury Secretary Tim Geithner, the top negotiator for President Obama. (BEGIN VIDEO CLIP) TIMOTHY GEITHNER, TREASURY SECRETARY: There`s no agreement that doesn`t involve the rates going up on the top 2 percent of wealthy. Remember, it`s only 2 percent. (END VIDEO CLIP) KLEIN: Not necessarily going up to the Clinton era rates. Just going up. Today at a press conference at the Capitol, House Speaker John Boehner got a question about this. And listen carefully to how he responded or didn`t respond. (BEGIN VIDEO CLIP) REPORTER: Speaker, you did speak with the president earlier this week. Can you characterize that call? I mean, did he call -- did he have any kind of counteroffer? And also we understand that he just is making clear that it`s got to be increasing rates for the wealthy or no deal. Are you willing to give a little bit? Maybe just not all the way to 39.6? REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The phone call was pleasant, but just more of the same. The conversations that the staff had yesterday, just more of the same. It`s time for the president, if he`s serious, to come back to us with a counteroffer. (END VIDEO CLIP) KLEIN: Again, not a no on the rates going up thing. John Boehner didn`t answer the tax part of the question at all. He talked about the phone call. It was pleasant. He didn`t say we did not allow tax rates to go up at all. So, you see the deal that`s becoming clear here. The one that`s taking shape even as Boehner says they`re making no progress and Republicans talk doomsday plan and Democrats roll their eyes. A lot of the players I talked to think something like this is going to happen. The final rates raise a bit, giving Democrats a win, but not all the way back to 39.6 percent, giving Republicans a win. Maybe, they`ll be 37 percent. Maybe 37.5, maybe 38. That won`t raise enough revenue so it will be combined with policy to cap tax deductions for the rich, perhaps at $25,000 or $50,000, or along the lines Republicans have been talking about. That won`t take effect right away. It will be phased in. It will probably include an exemption for charitable contributions. The harder question is what Republicans get on the spending side of that deal. But even that doesn`t seem to be such a mystery these days. There are a lot of nips and talks to Medicare in particular. There`ll be more cost sharing. There will be what`s called a unified deductible and increases in provider payments. And the headline Democratic concession is likely to be the Medicare eligibility age rises from 65 to 67. Medicare eligibility age rises. Democrats do not like that idea as House Minority Leader Nancy Pelosi explained yesterday. (BEGIN VIDEO CLIP) REP. NANCY PELOSI (D), CALIFORNIA: First of all, show me the money. I don`t even know why that is something that people think is going to produce money. What are we going to do with people between 65 and 67? Why is that -- where is the money? Show me the money there. But it`s not even the right thing to do, first and foremost. But is it a trophy that the Republicans want? Is that the trophy they want in order to do what is right to raise the rates for the wealthiest people in our country? (END VIDEO CLIP) KLEIN: Let me say for the record I think Pelosi is right. I don`t think raising Medicare eligibility age is a very good idea. And later on the show, I am going to show you the money on it. I`m going to show you exactly how it works. But for now, note what Pelosi did not do, she did not rule out. And if Republicans end up getting it, and remember, it is something the Obama administration told John Boehner they were willing to trade away back during those 2011 negotiations, if Republicans end up getting it, that will feel like a big win for them. Enough perhaps to unlock the tax deal. I`m not saying the final negotiation here will be easy. One thing that`s a tough sticking point in negotiations is the debt ceiling, where we began tonight, which the White House wants to get rid of forever. There`s not been a lot of Republican movement on the forever deal. So, I`m not saying they are not going to get to a deal by the deadline. We could be here on Christmas. But don`t be fooled by the posturing. There is a sailboat here and it is coming clearer everyday. Joining us now is Peter Orszag, the former budget director for the Obama administration`s Office of Management and Budget in 2009-2010, now, vice chairman of global banking at Citigroup, a veteran of these negotiations, a master of all things budget. Peter, thank you so much for being here on a Friday night. PETER ORSZAG, FORMER OMB DIRECTOR: Good to be with you. KLEIN: Peter, you have been in a lot of these negotiations. You have been in their rhythms and seen how they go. What is your take on where we are right now? ORSZAG: Well, I think as you pointed out, it`s still early. It`s December 7th. And both sides would be complaining if there was an agreement in place right now. But you can see the pieces coming together as you laid out on the fiscal cliff, some increase in marginal tax rates coupled with some kind of cutting back on tax expenditures. I think the real concern is shifting or will shift from the fiscal cliff to the debt limit. It`s not at all clear that the Republicans will agree to including a debt limit increase in that kind of package. And if they don`t, we may get past December 31st only to find ourselves with a big problem in February or March. KLEIN: Well, the Obama administration, the White House, has been clear that they say they will not sign anything -- even to get past December 31st -- that does not include a debt ceiling increase of some sort. So do you think they can hold firm on that if Republicans offer them a package that doesn`t include the debt ceiling? Do you think they`ll be able to not cave on that? ORSZAG: This is where I think the tension is now arising, which is even if you`ve got some agreement over the tax rates which will jam the Republicans a bit, can you jam them on the debt limit also? I think the concern will be an administration overstepping a little bit or overreaching and trying to jam a debt limit increase, especially in the kinds are being discussed now. I`m all in favor of getting rid of the debt limit. It makes no sense from a technical perspective, from a policy perspective. But it`s probably a bridge too far to attempt that right now. And so, the question really will become without any more significant entitlement reform, I`d say at the least the kind of Medicare eligibility age increase that you were discussing is a debt limit increase going to be part of the package. And if not, will the administration win a pyrrhic victory on marginal tax rates only to find itself in a harder position in February with the debt limit still out there. KLEIN: The other side of this is the question of whether or not Speaker Boehner can actually deliver votes. I mean, the thing that a lot of people worry about in private is that him and Obama will cut a deal sort of in late December negotiations. But Boehner has already been making tough moves with conservatives on his own caucus, kicking a couple of them off of communities. And that when it comes down to it, he`s going to agree to something with the president, and it is not going to be able to pass his own conference. Do you have any sense of what you think he`s able to do and not do at this point? ORSZAG: We come back -- yes, we come back again to I think the entitlement question. I think it`s going to be easier for the House Republican Caucus to swallow some marginal tax rate increase and a debt limit increase especially if they have something to show for it. And the irony here is, I actually think, on a whole variety of issue, the Democrats should be in favor of certain kinds of progressive entitlement reforms. So, it`s not actually that big of a give. On Social Security, as an example, Democrats have won for the time being on privatization being completely off the table. I think there`s a strong argument for trying to lock that in now as oppose to waiting and having that potentially come back. In addition, one of the big concerns here is doing too much fiscal austerity too soon in 2013. The more you did in the form of Social Security which can be phased in gradually over time, the lighter the load imposed in 2013. That`s a good thing despite the news this morning from the unemployment release. We still face a labor market that`s much too weak. KLEIN: So, let me then just ask you, do you think -- do you think they get this done that is at least two years or more by Christmas? ORSZAG: I think that`s less than a 50 percent, including the debt limit increase in more than two years, less than 50 percent at this point. KLEIN: Less than 50 percent. Peter Orszag, former director of the Office and Management and Budget, now at Citigroup, thank you for your time. I wish your probability had been higher. ORSZAG: So do I. KLEIN: Just when we were starting to think it might be a slow news day, bam! The Supreme Court is going to take up same-sex marriage. History is on the docket twice, coming up. (COMMERCIAL BREAK) KLEIN: In 1967, Supreme Court ruled unanimously that race cannot be used as a basis to restrict marriage in the United States. This was a famous case. You learned about it in high school. Loving versus Virginia. The amazingly named Lovings were Richard and Mildred Loving. And in 1958, they left Virginia and traveled to Washington, D.C. so they could get married. When they returned to Virginia where interracial marriage was against the law, they were sentenced to a year in prison for getting married. When the judge in Virginia sentenced them to prison he said, quote, "God created the races and placed them on separate continents. The fact that he separated is so that he did not intend for the races to mix." The Lovings appealed that decision and won at the Supreme Court. But why did it take until 1967 for the Supreme Court to weigh in on interracial marriage? By 1954, 13 years earlier, the court had already ruled in cases involving race and segregation and discrimination. Perhaps most famous in Brown v. Board of Education which the court held that "separate but equal" was unconstitutional. So, again, why wait until 1967 to hear the case about interracial marriage? Here are all of the states that had laws on the books in 1947 banning interracial marriage. Most of them, right? By 1967 only 16 states still had the laws on the books. In the decades between 1947 and 1967, the years between -- the years the Supreme Court was staying mum on the issue, most states decided on their own, that it was unconstitutional to ban interracial marriage, or at least unwise. The court was following on their heels, following the heels of public opinion. This is a big debate in the legal world. Is the Supreme Court influenced by American public opinion? These are nine people who could completely ignore the will of the people. They are appointed for life, no elections, no accountability. They can totally ignore us if they so choose. But many legal experts say that is not how it works. Supreme Court justices are, in fact, swayed by what the people think about issues. Today, the Supreme Court announced it would hear two cases involving same- sex marriage next year. That is huge. They said they would hear the Prop 8 case out of California. Prop 8 is the California ballot proposition which amended the California Constitution to define marriage between a man and a woman. The court will weigh, some time this year, probably in June, whether that amendment is unconstitutional. But the court also said it would hear a challenge to the Defense of Marriage Act, the 1996 law passed under President Clinton to define marriage only between a man and a woman, to the purpose of federal law. So, the question is: why now? Why did the Supreme Court choose this moment? Well, nine states and Washington, D.C. all recognize same-sex marriage now. That doesn`t seem like very many, but it`s happening quickly. Three of those states, Maryland, Maine, and Washington, in those, people voted to legalize marriage just in November, first time voters have ever done so. And there`s a big public opinion trend here. Since `04, "The Washington Post"/ABC News polls have been asking people should it be legal or illegal for gay and lesbian couples to get married. In 2004, 59 percent of people said they thought it should be against the law. In 2012, it was almost the opposite, 53 percent favor making it legal. Pew has been asking the question since 1996, I`m sorry, when 65 percent of people were against same-sex marriage. By October of this year, 49 percent were for marriage equality, while 40 percent opposed it. One more set of numbers, even more telling. Gallup released its most recent polling on same sex marriage this week. Fifty-three percent of people polled support legalizing same-sex marriage, which ties a previous record high. But look inside the poll. Among young, people 18 to 29-year-olds, 73 percent say they think same-sex marriage should be recognized, 73 percent. So, here`s the question. The court is choosing to rule now. Are the justices looking at the trends and saying we need to use our power, our installation from public opinion to put a stop to this, or are they looking at the trends and seeing a chance to join history, to become the court that said gay marriage is protected under the Constitution? Joining us now is Kenji Yoshino. He is Chief Justice Earl Warren professor at constitutional law at NYU Law School. Kenji, thank you for being here. That is a great title. KENJI YOSHINO, NYU LAW SCHOOL: Thank you, Ezra. KLEIN: My question for you is simple. It`s two words: why now? YOSHINO: Well, in part, because the court is a passive institution. It can`t reach out and grab cases. But I think that there`s an additional layer to your question, which is why didn`t the court say we`re not going to review this case? One of the cases that we didn`t look at in your excellent introduction is a 1956 case called (INAUDIBLE). This is right after Brown v. Board of Education when they are handing out these orders extending the principle at public accommodations. But it has a marriage case come up before it and completely on persuasive ground gets rid of it and says this is too soon. And so it sat until 1967, 11 years later to take it up. So, many of us thought this is exactly what`s going to happen with the Prop 8 case. I think the DOMA case is slightly different for reasons that we can go into. But I think many of us thought the Prop 8 case it`s going to deny. It`s going to go back. Same sex marriage is going to be legal in California but nowhere else and then the court is going to wait another 10 years and then wash out the outliers as it did in the interracial marriage context. KLEIN: So what are the implications -- the differing implications of how they could rule in the two cases? What different parts of the gay marriage question could they resolve? YOSHINO: Right. So, the DOMA case is a much more easy case, from my perspective. It`s a much more parsimonious challenge in the sense that all it does is to return Congress to its original position of following whatever states say the definition of marriage are. So, in some ways, it was very ingeniously crafted because it`s a kind of movement. Conservatives in the court tend to be very pro-state`s rights. KLEIN: But it`s a states rights solution. YOSHINO: Exactly. And the liberals tend to be very pro-gay. So, essentially, when you`re arguing towards the middle, like Justice Kennedy, then you feel like Justice Kennedy`s favorite things, states rights on the one hand, gay rights in the other. That`s clearly a fifth vote for this case. We assume, right? So I actually -- I think everyone imagined, especially since federal appellate court had struck down a congressional statute, that almost invariably leads to the Supreme Court to review the case. Almost everyone thought they would take the DOMA case. I think they are going to do the right thing on the DOMA case and strike it down. KLEIN: OK. So -- YOSHINO: The Perry case is much more complicated, because the DOMA case doesn`t affect any state decisions as to whether or not to allow same sex marriage. Whereas the Perry case, the outcome could be -- KLEIN: Again, the Perry case is the Prop 8 case in California. YOSHINO: Exactly. Thank you for helping me out there. The case says there`s this definition passed by a ballot initiative in 2008 that says that marriage is between one man and one woman. If the Supreme Court goes really broad on that and says there`s a fundamental right for same-sex couples to marry, that could flip the remaining states 41 states that don`t have same sex marriage to require them to have same sex marriage. I don`t think that`s going to happen, Ezra. I think that there are many ways in between zero and 50, right, whether they expect solution. So, for example, the court could look at this and say there are a bunch of states that say we`re going to give you the rights and benefits of marriage, but we`re going to withhold the word marriage. And that`s all we`re going to withhold. The court can look and say, all you`re worried about is brand, and what you`re saying is that if you let gays into marriage, that`s going to diminish the brand. That`s animus, we`re going to strike that down. We`re going to add those states to the ledger of the nine states that already allow same sex marriage bring the total to 17. And somewhere down the line, we`ll do the Loving vs. Virginia move of washing out the outliers, which you sat in 1967, 16 states. Right now, it would be washing out 41 states, which is a much bigger proposition. KLEIN: Right. So very quickly before we go, today is a good day for supporters of gay marriage. That`s the bottom line? Or in your -- YOSHINO: I think it`s a great day. I think it`s a great day because in the Perry case, you know, there`s no question it`s a great in respect to DOMA because I think people are confident that will come out in the right way if you`re on the pro-same sex marriage side. For the Perry case, I think it`s a great day even though there might be skeptics on that issue because in that case, there`s a beautiful record, there`s a trial in this case. Whenever there`s a trial, the pro-gay side wins. It`s almost a per se rule. So, in very red states like Arkansas and, you know, relatively red state like Florida, the gay rights activists have won and very blue states without a trial, we have lost, in states like New York and Maryland. So because there was a trial and a 3,000-page record the Supreme Court will look at, I think the Perry case is actually a sleeper winner. KLEIN: Interesting. NYU`s Kenji Yoshino, thank you so much for being here tonight. YOSHINO: Thanks so much for having me. KLEIN: If you are former President Bill Clinton, you have a global initiative named after you. If you`re Edwin Hubble, there`s an awesome telescope named after you. If you`re George Foreman, five sons named after you and grills. I`m Ezra Klein and the only thing named after me is the challenge we`ve sort of invented here when I explain a real wonky stuff quickly. I`m OK with that. Tonight`s Ezra Klein challenge is next. (COMMERCIAL BREAK) KLEIN: When I want to talk about something so geeky that I`m pushing the limits of what even THE RACHEL MADDOW SHOW staff of geeks will tolerate, the producers here get me to do it in two minutes or less. Tonight`s challenge comes in something I mentioned earlier, the Medicare eligibility age. Sexy topic right? Try to control yourself, Rachel Maddow`s audience. Now, despite the fact it`s incredibly unpopular, Republicans really want to make cuts in Medicare and specifically, they want to raise the eligibility age by two years, from 65 to 67. That is also super unpopular. But the White House is open to it. They are open to it in 2011, in the Boehner/Obama talks. They are open to it now. What`s weird about this policy is it`s always presented as the height of fiscal responsibility even though it is kind of fiscally irresponsible, which brings us to tonight`s challenge, why raising the Medicare eligibility age does not actually save you very much money and is probably a bad policy idea in under two minutes. OK. Do we have the clock? Let`s do it. The argument for cutting 65 and 67-year-olds out of Medicare in a deficit talk is simple. It saves money, right? The Kaiser Family Foundation estimates that when it`s all said and done, the government would save $5.7 billion in the first year of that plan. But those 65 and 66-year-olds, they don`t disappear. They`re still going to be here and they`re going to even get sick sometimes, which means the savings we`d see by kicking them off the Medicare rolls, they pop back up elsewhere in the economy. It`s not pure savings. It`s a cost shift. First and foremost, of course, you`re going to see increased costs for seniors who will have to find another health insurer, since Medicare is huge and it uses its bargaining power to pay less by quite a bit. The seniors turning to private insurance will have to pay more from the same coverage, about $3.7 billion more in the first year of the policy. For those 65 and 66-year-olds who are eligible for Medicaid, states will have to pick up some of that tab, so nearly three quarters of a billion dollars will move to the states, we think. Then there are the employers. Many of the newly Medicare ineligible will turn to their employers. That will increase the health care costs of American companies by $5.4 billion. Some of the seniors, of course, will turn to the Affordable Care Act, raising premiums for the younger people in the new insurance exchanges. Those left in Medicare will pay a higher premium, too, because the younger and healthier seniors have left, which means the average premiums go up for those who are older and sicker. All that will cost about $2.5 billion. So, in order to save the federal government $5.7 billion, this plan to raise Medicare eligibility would cost twice that much across the economy. Done. Stop the clock. So that is the explanation in under two minutes as promised. And now, you might wonder, though, given all that, why are Democrats even considering a policy so fiscally pointless? Well, the reason this plan doesn`t save much money is the same reason they are considering it. It won`t hurt people all that much, at least compared to the alternatives on the table. Jonathan Chait made this point at "New York Magazine", calling the Medicare eligibility proposal a sensible bone to throw to the right because it has weirdly disproportioned symbolic power, both among Republicans in Congress and establishmentarian fiscal skulls. Meager and inefficient though the savings may be, they pack a lot of punch in delivering Republican votes. That`s what Nancy Pelosi meant when she called it a trophy Republicans want. Republicans see this as a big win for them. Big. And that`s kind of the White House`s quiet argument. It`s a terrible policy, but because Obamacare and employers and others are there to catch a lot of these people, it might get more Republican votes while doing less harm to seniors than the alternatives. (COMMERCIAL BREAK) KLEIN: There is in life this thing known as reality. Reality is real. That is kind of its key feature. It doesn`t care whether or not you like it, and if you go against it, you tend to lose. For instance, when your political party decides to ignore warnings about the changing demographics in the country and you decide to go against the reality that Latino voters are the fastest growing bloc, or that women are voting in really big numbers, that African-Americans are voting in big numbers, and you focus instead on policies that Latinos and women and African-Americans find insulting, backwards and cruel because you hope they won`t show up to the polls in big numbers, you end up with this reality -- Barack Obama, two-term president. Republicans tried to cross reality in the last election and reality won. The demographics of the country, they are changing. We`re facing another set of realities about our changing nation. Since 1950, the federal government has taken in taxes or revenue that equals about 18 percent of the overall economy. We did the math. It`s 17.8 percent to be exact. That`s become something of a magic number in politics on both sides of the aisle. You tell Orrin Hatch, the ranking Republican on Senate Finance Committee, loves the 18 percent. If we keep all the Bush tax cuts, we stick at that magic number. According to Orrin Hatch, that means, quote, "taxes would still be high enough compared to recent history." Just because that`s high they were in the past. Across the political spectrum, consider Warren Buffett, a supporter of Democrats and higher taxes for the rich. Last month, Mr. Buffett wrote on "The New York Times", quote, "Our government`s goal should be to bring in 18.5 percent of GDP and spend about 21 percent of GDP." Why? He doesn`t say. He just says those are levels, quote, "that have attained over extended periods in the past." Well, then, permit me a dissent from the Oracle of Omaha here. The average of our past revenue is not sufficient to sustain our future. In fact, it wasn`t even enough to support our past. Only three times in the past 50 years has the 18 percent been enough to balance the budget. And all those times were in the `60s. The only recent balancing came during the Clinton era when growth was strong in revenue range, from 19.5 percent of the overall economy to 20.6 percent, by bumping along with magic average of 18 percent, we have built the national debt that now dominates our political discussion and it is going to get worse if we stay there. The future debt we`re always talking and worrying about is driven by two things: health care and old people. And the coming years are going to have more of both. Today, the elderly make up 13 percent of the U.S. population. By 2050, they are expected to be 20 percent. That means, you`ll need to spend a lot more on Social Security and Medicare. And meanwhile, the development of new miracle treatments that we hope will keep happening and that will push the cost even higher. The future turns out to be expensive. That`s simply the reality of it. And opposing tax increases doesn`t change that reality. There`s nothing in Grover Norquist`s pledge that stops the aging process. If there was, I would take it. So there`s no way that the tax receipts of the 1960s will support the demographics of America in the 2020s, or the 2030s. Anyone who says otherwise is not taking the reality seriously. Joining us now is a man who always takes reality seriously, the great Chris Hayes. CHRIS HAYES, MSNBC HOST: Religiously. (LAUGHTER) KLEIN: So one thing I always think is true in our political discussions is we don`t like to face up to big changes coming at us. We like to use them as evidence for whatever policies we`ve always supported are adapting. But particularly, the aging of the society -- HAYES: Yes. KLEIN: -- I don`t think we have come close to thinking about what that will mean for our economy or the government or any of it. HAYES: That`s right. The only discussion we have is we`re getting older and so the entitlement programs will go bankrupt, so we have to make cuts. But, you know, when you think about like, what does a mature society value and how does it want to spend its marginal dollar. Think about as an individual, how you want to spend your marginal dollar at 25 and how you want to spend it at 75. At 25, maybe you want to buy an extra shot or get a video game system or -- KLEIN: I feel like you`re making -- you`re making the 25-year-olds look a little trivial here. HAYES: Or maybe another book let`s say. But at 75, if someone says you can spend marginal dollar to get an extra three months of life, like people are going to buy that, right? And as we mature as a society, as we get older, like that -- those choices are on a social level, we`re just going to make more of them and it`s going to be more expensive and we`re all going to have to pay more for it. There`s no way around that. KLEIN: And one of the ironies I always take in this conversation is that the fundamental challenge of an aging society is you have more old people and fewer young working people. HAYES: Right. KLEIN: And work rates obviously change slowly, and lately they`ve been dropping, we actually do have a way to change it if we wanted to. We have immigration. A lot of people would like to come here, but it is a same coalition that doesn`t like increasing taxes to pay for your aging society that also doesn`t like letting anybody in to work for and pay for your aging society. And something is going to have to give in a very big way. HAYES: Yes. And I think actually, the tension on the immigration side is going to give first for exactly that reason, right? Yes, I do, because I think actually, the hydraulics of this work out that the pressure is the least there. You know, the bizarre thing about the modern Republican Party and you have written about this and I talked about this is the fact that it is essentially is this kind of rear guard action to defend at all costs the social democratic state that older Americans that vote for Republicans live in, right, and worries about any incursions from people outside there. And if ultimately the fact is they are choosing between more liberal immigration policy and cutting into those social democratic benefits that older Americans get, I think you can see people actually choose the immigration pathway. KLEIN: The other thing I worry about is the interaction of the pledging Republicans and what will happen here, because one thing that is true is that taxes will have to go up probably by more than President Obama is talking about now and you can`t -- it isn`t a good idea to do all that on the income tax code. When you hit income taxes to a certain level, it gets really inefficient. HAYES: Right. KLEIN: But Grover Norquist, if you talk to him, is very smart on this. He says, the reason I won`t allow consumption tax or carbon tax is because even if it`s more efficient, that makes it easier to raise taxes. And I worry the compromise here is a tax code that gets high enough it`s hurting the country because Republicans won`t allow real tax reform that would support it. HAYES: Right. And the other problem -- I totally agree. And the other problem is you end up in a perverse situation where we on the books have a progressive system, even compared to other OECD countries. And we pay much less in taxes overall and we have much stingier-defined public goods that we provision through the state, right? The point is that the most successful social welfare states are one where there`s this universal pay in and universal benefit, right? And the way we`re going with this increasing inequality is talking about means testing and redistribution, which is a way from a model of universal pay in and universal benefit, that is the thing that is long term sustainable. KLEIN: Right. Chris Hayes, host of "UP WITH CHRIS HAYES", which is going to be on tomorrow morning, and we should be up for -- thank you for being here tonight. HAYES: Great to be here. KLEIN: One of the coolest things human beings have ever seen celebrates a big birthday today. It also happens to be one of the coolest mysteries never solve. It`s sort of a best new moment of geek and it is coming up. (COMMERCIAL BREAK) KLEIN: In 1997, Khaled Meshaal was the Jordanian bureau chief of Hamas, the Palestinian group which is both the elected governing entity in the Gaza strip and considered by many, including the United States, to be a terrorist organization. At the time, Khaled Meshaal was living in exile in Jordan, and from there, he allegedly orchestrated a number of attacks on Israel. Israel`s prime minister was Benjamin Netanyahu and that year in 1997, Mr. Netanyahu green lit a plan for Israel`s intelligence agency to kill Mr. Meshaal. It did not go well. (BEGIN VIDEO CLIP) REPORTER: As Khaled Meshaal arrived at work, two suspicious men approached him. MESHAAL KHALED, HAMAS LEADER (through translator): I was just entering my office when I heard a sound. Then I felt an electric shock throughout my body. REPORTER: His body guard chased the two men up the street in Jordan`s capital Amman, caught them and beat them. The two insisted they were Canadian tourists out shopping. Within hours, Meshaal, a leader of the terror group Hamas was in the hospital vomiting, dizzy and on a respirator to help him breathe. The two men in the Jordanian jail were, in effect, hitman from Mossad, Israel`s legendary secret service. Their mission apparently to poison the Hamas leader in retaliation for suicide bombings inside Israel. The failed assassination, a humiliating blunder for Israel. UNIDENTIFIED MALE: It was really a disaster. It was as if it was part of a bad Hollywood movie. REPORTER: Jordan`s King Hussein was outrage. The hit was in his capital and he`s Israel`s strongest Arab ally. Hussein made two deals. He would return the two captured agents if first Israel would provide an antidote for the poison and second, Israel had to free this man from jail, Sheik Ahmed Yassin, the sick but still powerful spiritual leader of Hamas. Today, he got a hero`s welcome in Gaza. Also free, 22 Hamas fighters. The incident has proved a disaster. (END VIDEO CLIP) KLEIN: The failed assassination was indeed a disaster for Israel. The guy they were trying to kill did not die. Israeli agents were captured. Israel had to provide the antidote to save the life of the guy they were trying to kill, and they had to release almost two dozen Palestinians from jail in order to get their guys back from Jordan. There is pressure on Prime Minister Netanyahu to resign. Fifteen years later, Netanyahu is again the prime minister. And Khaled Meshaal is now the head of Hamas. He`s lived in exile the whole time. He was born in the West Bank and he left when he was a kid, but he has never, ever been to Gaza, which is where Hamas is based until today. Today, the Hamas leader visited Gaza for the very first time in his entire life. He was there to celebrate the group`s 25th anniversary. There will be a huge rally tomorrow. Also on the agenda, a visit to the family of one of the men released from an Israeli prison 15 years ago in the wake of that failed assassination attempt. That guy, one released from prison by Israel, he was successfully assassinated in 2004. Khaled Meshaal visited his family home today. But the most important thing to know here is how the head of Hamas got into Gaza. He was allowed to enter the territory through Egypt. Egypt`s former President Hosni Mubarak on the left never would have allowed it. He hated Hamas. Egypt`s current President Mohamed Morsi does not. He is a member of the Muslim Brotherhood, which is a cousin of Hamas. And so, the head of Hamas the first time ever was allowed to travel to the Gaza Strip. That`s one example of the tectonic shift in politics going on in this part of the world going on right now. Here is another. This is Cairo. Not during the revolution that brought Morsi to power, but now. This is Cairo right now. Tens of thousands of protesters have been out there for about two weeks in the famed Tahrir Square and near the presidential palace. They`re very upset that their newly elected democratic President Morsi is doing things that they not so democratic. He is specifically trying to make it so his decisions are not subject to judicial review. At least six civilians have been killed and hundreds injured in the violence. President Obama called his Egyptian counterpart yesterday to express concern about the situation that seems to be spinning out of control. He urged President Morsi to meet with and negotiate with the opposition. And then there is Syria, where NBC News reports the Assad regime is preparing chemical weapons that can be loaded on the missiles. And human rights groups say more than 40,000 people have been killed in the last 21 months. We here in America are really intent right now on how we will rewrite our tax code. But if matters in Egypt and Syria or Israel and the Palestinian territories which are already getting pretty deadly and tragic and chaotic -- if they get worse, the crisis about high end marginal tax cuts and budget deficits will begin to look a lot less like a crisis in comparison. (COMMERCIAL BREAK) KLEIN: You probably saw a really cool image, a nighttime view of the Earth from space. NASA was able to show us this image, thanks to a new satellite equipped with something called visible infrared radiometer suite. But this image of the entire globe of earth from space is not what you might think it is. We do not have a camera far enough away from Earth to get an image of the whole thing. This image is a composite, knitted together from data taken by the satellite as it made several passes around the Earth. Lots of the cool pictures you see like of hurricanes from space are actually composites. Anything close enough to the Earth to be held by its gravitational pull is also too close to get a whole Earth picture. For perspective, this is what the Earth looks like from the International Space Station. You can`t really see the whole thing at once. Only a couple dozen earthlings have ever been far enough from the Earth to see the whole thing. Like the crew of Apollo 8, who took this picture commonly known as earth rise from the window of the craft as they orbited the moon in 1968. Unfortunately, nearly half the earth was in shadow. An unmanned Soviet spacecraft called Zond 7 got this shot during a lunar flyby in 1969. I guess you would call that a gibbous Earth, not quite full, but close. But 40 years ago today, three people were able to get this amazing view of the earth. Fully lit by the sun. It is a shot you have probably seen so often, you don`t think how amazing it really is. It was nicknamed the Blue Marble and it was taken by one of the astronauts on board the last Apollo mission to the moon, Apollo 17. Apollo 17 launched 40 years ago today, December 7th, 1972. It was a night launch, aiming for Taurus-Littrow valley. The astronauts Gene Cernan, Harrison Jack Schmitt and Ron Evans aboard. Apollo 17 launched at night, and when they landed three days later, the sun was behind them. And so that particular launch trajectory put a fully formed beautifully lit Earth in the window of the command module at a time when the astronauts really should have been too busy to look at it. Here is how Al Rainer, who co-wrote the movie "Apollo 13", describes what happened. Quote, "At five hours and a few minutes into the flight of Apollo 17, one of the crewmen looked out the window. What he saw inspired him to grab the only camera that wasn`t stowed and snap a picture. But whoever did it said nothing on the radio or to their crewmates about it. It is possible they did it instinctively, hardly ever thinking about it because none of them thought to mention it for weeks. Rainer doesn`t say which of the three took the picture partly because NASA gives all three of them credit for it, and partly because none of them were supposed to be taking pictures right then. Today, NBC veteran space correspondent Jay Barbree got Gene Cernan on the phone for us. Gene told him that the astronauts don`t even know who took the photo because they were passing the camera back and forth between the three of them. That mystery turns 40 years old today, 40 years old. And it may never be solved. But next time you see a cool picture of the Earth from space, don`t take it for granted. Don`t just assume that kind of thing is easy to do, just jump up in a satellite. Take a minute to savor how freaking unbelievable it is they were ever able to get a shot like that at all. That does it for us tonight. Rachel will be back here Monday. Don`t forget, you can check out my work at the "Washington Post" at, or follow me on Twitter, and on Facebook, Now it is time for "THE LAST WORD". Have a great night. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. END