The Rachel Maddow Show, Transcript 10/15/13

STEVE KORNACKI, GUEST HOST: Thank you for joining us at home tonight. Rachel has the night off. She will be back tomorrow. This has really been an extraordinary day in American politics and we begin our coverage here almost where we left it. In the Senate tonight, Majority Leader Harry Reid and Minority Leader Mitch McConnell are again trying to hammer out a bipartisan deal to end the shutdown of the federal government and keep the government from blowing past the debt ceiling and defaulting international bills. Senators Reid and McConnell announced yesterday that they were close to agreement and then the whole thing fell apart in a giant clattering mess, only to start all over again tonight in the U.S. Senate. It`s been kind of like the movie "Groundhog Day", only a little scarier and a lot stranger. And our story begins here, the speaker of the House, there`s no need to adjust your set because this is supposed to be a photo of Jim DeMint, because Jim DeMint -- this is the Jim DeMint who resigned from the Senate back in January and who last served in the Senate eight years ago. He might as well be based on what happened today the person who controls the United States House of Representatives. The guy who actually has the title of the Speaker of House, John Boehner, gets to hold the gavel so he controls that but not much more. Even though Jim DeMint no longer holds any office in this country anymore, because he resigned from the Senate on New Year`s Day, he now runs a conservative think tank. Even though he`s no longer in Congress, Jim DeMint might as well be the speaker of the House. Today, we entered day 15 of the government shutdown. We`re just over 24 hours away of defaulting on our national debt, from hitting the debt ceiling and running out of money to pay our bills. And while there were Tea Party Republicans who say they`re not worried about the Thursday deadline for hitting the debt ceiling, world financial leaders are warning of, quote, "massive disruption the world over." The U.S. goes into default. China is calling for a de-Americanized world because of the, quote, "intensifying domestic political turmoil in the United States." The U.S. was put on notice today from one of the big credit ratings agencies, quote, "The repeated brinkmanship over the debt ceiling dents confidence in the effectiveness of the U.S. government and political institutions. The agency is threatening to downgrade America`s credit which could cost us billions of dollars in higher interest payments. Those are some of the consequences of letting the U.S. default. It was with that catastrophe getting closer by the hour that Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell yesterday hammered a short term fix, the framework for a deal that would reopen the government and raise the debt ceiling temporarily. And that was how the nation went to bed last night, with signs of the deal was close at hand. A bipartisan plan was taking shape in the Senate. The House Republicans were set to talk about how to handle it this morning. That`s where we left the news at around this time last night. That is not where Congress left the news, because late last night, after senators reed and McConnell announced that they were on the verge of that deal, Republican Ted Cruz went to work. Now, Cruz has spent the last few weeks meeting with and delivering pep talks to Republicans in the House. He`s been egging them on to shutdown the government, telling them not to cave in, not to listen to House Republican leadership, not to fear any political consequences. And last nights on the news, the Senate would be sending over a plan for the House to consider, Cruz met with about 20 House Republicans at this Washington Tex-Mex joint. Quoting the "Roll Call" report, the group is a collection of members that have often given leadership headaches in recent years, by opposing both compromised measures as well as packages crafted by fellow Republicans. Continuing from "Roll Call", quote, "The dinner meeting was held in a private basement room, and the group was spotted by majority whip Kevin McCarthy." Let`s stop there for a second and remember that the job of he whip, this is Kevin McCarthy`s job as the Republican whip in the House is to keep Republican members in line, to keep them voting in the right way, the way that leadership wants them to vote. And at this, the most sensitive possible moment, last night at this Tex-Mex joint, Kevin McCarthy, the whip, discovers Ted Cruz, who`s not even a member of the House, apparently whipping Republican voters against the bill that the party desperately needs, right there in Tortilla Coast. That Tortilla Coast summit set the stage for what played out today in Washington, because John Boehner spent today desperately trying to craft a measure that could pass unanimous conservative support, a measure that could get all of those Republicans who met with Ted Cruz last night on board. And all day today, reports trickled out of the Capitol of different sweeteners, different combinations that Boehner and his team were toying with -- tinkering with to try to win over the right. Over in the Senate, both parties gave up talking for a while, gave up to see what Boehner could put together. Finally, middle of the afternoon, a House vote was scheduled for a Republican authored bill to reopen the government and to lift the debt ceiling. Boehner set that vote for tonight. That all happened late this afternoon. And the next thing to happen was this -- Heritage Action announced that it would score that vote, it`s the political arm of Jim DeMint`s Heritage Foundation. It posted a notice this evening that Republicans had better no on Boehner`s new plan for ending the shutdown and raising the debt ceiling. DeMint has been calling the shutdown a temporary slowdown and with that notice, he essentially told Republicans in Congress to keep it going. That left Boehner with no choice but to call off the vote, not because he didn`t want to pass a bill, not because he didn`t want to get this all behind him but because he didn`t have the votes. So, now, it`s back to Senator Reid and back to Senator McConnell. They`ve resumed their bipartisan talks. There are reports that a deal is imminent. Any deal they reach still has to get through the House. John Boehner still has to somehow get it done. Can he get that done? Can he survive getting that done? Why should anyone believe he can? He`s not been able to do it so far. If crashing through the debt ceiling would be terrible for Congress to allow, where does John Boehner get the votes to make sure it doesn`t happen? Joining us now is Robert Costa. He`s the Washington editor for "National Review." He`s one of the best-sourced reporters on the Hill. Someone you should follow on Twitter to know what Republicans are doing next. Thanks for being here, Robert. Appreciate the time. So, let`s start with the reports we`re all hearing about, you know, McConnell and Reid are back to talking again, imminent deal, do we have a basic sense of what the contours of that deal are going to be? ROBERT COSTA, NATIONAL REVIEW: At this point, Republicans have such little leverage. Senate Republicans are hoping the House Republicans could pass something tonight. But when that plan fell apart, now it goes back to the Senate and all the Republicans in Senate are trying to do right now, Steve, is protect sequestration. That`s it. They know they`re on the ropes and that`s all they can possibly get. KORNACKI: So, what -- let`s say we get an announcement that Reid/McConnell have officially come up with a deal. It`s generally a deal that the Democrats are happy about, given the circumstances. The question then is, (a), are we confident that Boehner will take this deal that comes out of the Senate and actually put it on the floor for a vote in the House? Are we confident that will happen? COSTA: I`m not entirely confident of that? They say Boehner has two options, he can accept what the Senate brokers tomorrow morning. Or he can try to float some kind of six-week extension of simply the debt limit. I think the leadership would like to embrace the Senate deal. But as we saw today, the way things are so fragile in the House, Boehner may just go for a debt limit extension. KORNACKI: And do we have any sense of how Democrats will respond to is that. COSTA: They would be very unhappy. The Democrats, as much as Republicans want to get beyond this impasse, and the Democrats I think are ready in the House to support whatever comes out of the Senate. But Boehner starts trying to really tinker with the Senate deal, it could be chaos on Wednesday and Thursday night. KORNACKI: So, it absolutely could. So you`re talking about the two choices that Boehner sort of se sees himself having right now. This whole issue he`s been talking about since he became speaker in 2011, he`s ought got to worry about the coup. He`s always got to be looking around the corner for the threat to his leadership. Do you think that if he put the deal that was cut by Reid and by cut McConnell on the floor, I think it`s pretty safe to say it would pass. The question is, could he survive something like happening as speaker? COSTA: I actually think he could survive because what we have seen a lot of political theater from the leadership. They`re trying to prove step by step that they`re doing everything they can. They`re exhausting all possible options on the table before they accept some kind of deal. So, that`s why tonight`s failure to pass something in the House, on the surface, it`s a huge failure for the leadership, but it does show those conservatives on the right that the House can`t even come up with an agreement on its own plan, and maybe that`s a lesson to them that they have to move toward the Senate deal. KORNACKI: Well, and that brings me to next part of this, because the dates that are sort of floating around out there for if this Senate becomes the deal that ends up getting passed in the end and we`re able to avert the crisis here, we`re talking about the continuing resolution that funds the government, the government being open through January 15, we`re talking about the next debt ceiling deadline being set for February 7. So, it`s not too far off from the future. You look at everything we`ve just been through the last few weeks, you look at all this sort of dancing around that Boehner has to do, that he still is doing really as we speak right now -- is there any sense that we won`t go through this all over again in January and early February? COSTA: I think the closer we get to the midterms, there`s going to be a reluctance on both sides to have another type of showdown. Republicans, especially in the House, are very interested in the House in having a showdown on Obamacare, on the C.R. -- let`s say it goes into early January of 2014, they want to have a fight on the delay of the individual mandate. This is going -- Obamacare is the Republican`s message ahead of 2014. So don`t look for them to relent in any way. KORNACKI: And we talked about it in a set of there, you know, this announcement from the Jim DeMint, the announcement from Heritage today that basically said this is a key vote, if you`re a Republican in the House, you better be voting against this thing. Can you talk about what affect that had on the most conservative members of the House? And what effect maybe that meeting with Ted Cruz we talked about at the Taco joint, the Mexican restaurant last night, what effect that might have had in the most conservative member, the sort of these outside pressure groups or in the case of Cruz as senator coming over and talking to them, what affect that`s had on Boehner`s ability to lead and how that played out today? COSTA: It`s easy at first blush to shrug off some group like Heritage Action or shrugged off what happened at Tortilla Coast with Senator Cruz with House conservatives. But in the way the Republican Party functions right now in the House, these are critical events because the leadership has very limited ability, no earmarks to really whip votes. And so, these outside movement groups like Heritage Action and movement leaders like Senator Cruz have been really able to corral votes in the House. They have been, as you said in the introduction, whipping votes in the House. That`s something we really have never seen in the American politics. It`s almost surreal to watch unfold., but its happening. KORNACKI: And what do you expect, Robert? I mean, you know the factions of the Republican membership in the House really well. We always hear about there`s this really hardcore group of sort of Ted Cruz type Republicans in the House and there`s some sort of secondary layers of that, I guess. But if the Senate deal, the framework of which you`re sort of describing, goes to the floor in the House, how many House Republicans, do you think, safely could vote for that? What kind of support do you think it would get? COSTA: It`s very fluid, because you know that bloc of 50 you mentioned, the bloc of conservative hardliners they`re going to resist it. And the question is, does that larger group, I call them the silent majority, 100 to 140 House Republicans who are center right, are they influenced by that bloc of 50, and do they as they did tonight with the House bill, resist and just push it back against the leadership? That could easily be the case. And that`s what Boehner grappling with? What does Boehner do if his conference is not influenced by him but by that bloc of 50? KORNACKI: And Robert Costa, a quick question at the end because I think everybody -- there`s so much sort of craziness in the air today, but the bottom line, do you expect that when this debt default deadline comes later this week, that we will ultimately be in the clear, we will not be having a debt default, are you confident at least that will be the outcome? COSTA: I think Speaker Boehner from day one has said he wants to avoid a default. He said that publicly and privately. The question is, can he bring something to the floor that does do that. Tonight show that he has difficulty bringing anything to the floor. So we`ll have to see. KORNACKI: All right. Not very encouraging there. But, Robert Costa, Washington editor of "The National Review" -- we thank you very much for joining us tonight. Now, the only clear thing in this battle is that one party has not wavered in its position. Why Democrats have been so consistent. That is next. And we`ll be talking to a Democratic member of the House about it. (COMMERCIAL BREAK) KORNACKI: After House Democratic leaders met with the president at the White House today, they held a press conference. Up there, there you can see Minority Leader Nancy Pelosi and the rest of her leadership team, Steny Hoyer, James Clyburn, Xavier Becerra, I think there`s Chris Van Hollen over there. One by one, they took turn at the microphone and they all said that the plan Republican House leaders were crafting to end the shutdown and avert a default would receive absolutely zero support from Democrats. (BEGIN VIDEO CLIP) REP. NANCY PELOSI (D-CA), MINORITY LEADER: They have to know if it is as it has been described that they`ll have to do that with 100 percent Republican votes. (END VIDEO CLIP) KORNACKI: What`s notable here is that the plan that House Republicans were working on, the plan that those Democratic leaders pronounced themselves unalterably opposed to actually isn`t when you get down to it, that different substantively from the bipartisan deal that is apparently taking shape in the Senate. It`s a deal the Democrats seem ready to support. The main difference is apparently over Obamacare, which taking place in the Senate would make relatively small changes to the law, nothing that would seriously undermine it. House Republican leaders were talking about differently relatively small changes, but they also weren`t target about defunding the law anymore. They seem to be acknowledging that they have lost on that point. So why did Democrats denounce what they were planning so swiftly? The answer only makes sense when you think of this point in the context of the last three years, because it`s redrawing a line in the sand that was essentially wiped away in the wake of 2010 election. The Democrats lost control of the House and Republicans picked up more seats than in any midterm election in almost 75 years. It was back then a sheepish feeling to put it mildly among Democrats including the president. (BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I`m not recommending for every future president that they take a shellacking like I did last night. (END VIDEO CLIP) KORNACKI: That was President Obama the day after that shellacking back in November 2010. Two years earlier, being elected with the largest share of the vote for any Democrat since LBJ. And now, here he was acknowledging just how far public opinion had shifted. I get it, he was telling the country, I was going to change. That was November. Then, the next month, December 2010, after that shellacking but before the new Congress class got sworn into office, the administration made a deal with congressional Republicans to extend the Bush tax cuts. Obama had actually campaigned in 2008 on the pledge to get rid of them, but after losing so badly at the polls, he changed his tune and he cut a deal that also included some new stimulus money. For the most part, the left hated it. The polls also showed that the public actually liked it, they liked what they were seeing a real bipartisan deal. So, the White House that was take-home message, take a conciliatory tone, work with congressional Republicans, be practical, cut deals, and you get rewarded. This was going to be the White House`s way back from that disaster of 2010. The only problem with the plan, Bush tax cuts deal in December 2010 was made when Democrats had lame duck majorities in the House and the Senate. In January 2011, scores of Democrats officially left office. A brand-new batch of 63 Republican freshman were sworn in, freshman who didn`t share the White House`s desire to make deals. These are freshmen who won office by pledging to fight Obama on everything and to compromise on nothing. This is the backdrop for what became the lowest moment of the Obama presidency. He spent the first seven months of 2011 convinced he could strike a sweeping fiscal deal with that new Republican Congress. He entered into talks with John Boehner as a debt ceiling deadline approached and then he discovered that Boehner`s caucus had zero interest in any deal with Obama`s name on it. The lowest moment of Obama`s first term. (BEGIN VIDEO CLIP) RACHEL MADDOW, TRMS HOST: Word of the controversial S&P downgrade coming tonight, of course, in the wake of yesterday`s 513-point drop in the Dow Jones. Markets around the world doing the same yesterday. Today, the U.S. stock market had finished largely flat. Two other big credit rating agencies, Moody`s and Fitch thus far have maintained the nation`s AAA rating, although they have warned lawmakers that downgrades were possible in the future. A downgrade of course is what the Obama administration and Congress were hoping to avoid when the president signed a deal to raise the debt ceiling at the very last minute to keep the U.S. from defaulting on its debt. This downgrade of the nation`s credit rating is essentially an indictment of the nation`s political process. At roughly 8:20 p.m. Eastern Time tonight, after n a night full of confusion as to whether this would happen, and whether there should be scene as legitimate if it did happen, S&P went ahead with their downgrade decision. (END VIDEO CLIP) KORNACKI: It is summer of 2011. House Republicans claimed the debt cells as leverage and they threatened a default if the president didn`t give away the store. It took a last-second deal to avoid catastrophe back then. It`s a deal that haunts everyone to this day through what`s known as the sequester. Markets freaked out in 2011, the credit of the United States was downgraded, the Republicans, those dozens of freshman Republicans who came to Washington and promised never to blink, they walked away from all of that who believed the threat of a default was just standard operating procedure from the minority party in Washington. President Obama and Democrats took a different lesson away from that, though, that the line in the sand that had previously prevented debt ceiling hostage-taking had to be re-established. (BEGIN VIDEO CLIP) PELOSI: They have to know if it is as it has been described that they`ll have to do that with 100 percent Republican votes. (END VIDEO CLIP) KORNACKI: Joining us now is Congresswoman Barbara Lee, a Democrat of California, a member of the House Budget Committee. Congresswoman Lee, thanks for being here tonight. I wonder if we could start with, we talked a little bit there about what happened in the summer of 2011 when the president who had been sort of humbled by the 2010 midterms who decided his way back was going to be through compromising and negotiating with Republicans and he tried to compromise and negotiate over the debt ceiling with them, he felt that he got burned. I wonder how that experience of watching that all play out and of living through that in 2011 has shaped how you`ve approached this current crisis and this current showdown. REP. BARBARA LEE (D), CALIFORNIA: Well, Steve, first of all, I did not support that deal, because we saw what was to come, understanding that the Tea Party Republicans once again came here to Washington, D.C. to Congress, to do one thing and that was to dismantle and to decimate government. And we saw that in 2011, we see that now. This is part of who they are, this is their agenda, this is what they want to do and I think the history that you have recounted tonight, I`m glad you`re doing this because people have to remember who the radical extremists are and they are obsessed with denying millions of Americans affordable health care. KORNACKI: And I always thought, Congresswoman, at that moment when that debt ceiling deal, that last second deal that ended up sticking us with the sequester, when that was struck at the end of the summer of 2012, that was sort of a turning point in the Obama presidency, it was after that, he went to Congress and he had his American Jobs Acts speech, he gave his speech in Kansas a few months after that. He`s sort of tone towards the Republican Party in Washington and the way he talked about the challenges he was facing in Washington to the American people really seemed to change at that moment. Is that something that you saw? LEE: I saw that, but I also have to say that since President Obama took office, he has consistently and constantly tried to reach across the aisle, work with Republicans to try to get some bipartisan agreement. When the Recovery Act came forward, he worked very diligently to try to get them to support it and in fact, we put in provisions that I did not want to vote for. But because we had worked with the Republicans, the president really tried and we did not get one vote for the Recovery Act. So he`s been trying from day one to seek bipartisan agreements. Now, here we are, very close to a default. I mean, what in the world are these radical individuals who have come to Congress trying to do? They`re trying to do one thing and that is to dismantle and decimate government and the American people, thank God are realizing this. And so, hopefully, within the next 24 hours, they will come to their senses and Speaker Boehner will have courage enough to bring the bill forward, what comes from the Senate so that we can vote so that we can open the government up, we can make sure that we do not default on our debts, pay our bills and move forward and try to negotiate a budget that`s real for the American people. KORNACKI: Let me ask you a little bit about this deal that seems to be taking shape in the Senate right now, in the context of what we`re sort of laying out here about sort of stopping the Republican Party or stopping any opposition party in the future from claiming the debt ceiling, from claiming the threat of default as leverage, as negotiating leverage. This whole shutdown, this whole debt ceiling, you know, crisis was precipitated by Republicans looking to get major changes to Obamacare, looking basically to gut Obamacare with these threats, and Democrats saying there`s going to be absolutely no negotiations on Obamacare, this is a line in the sand, which had been drawn in the past, we`re going to redraw it right now. The reporting we`re getting and we had Robert Costa on in the last segment, the reporting we`re getting about the Senate deal is there`s probably going to be one small, very small, but a small Obamacare change in the Senate deal. It involved verification for people entering, you know, into the intent, for people getting subsidies from the federal government for the Affordable Care Act. Do you think the fact that anything was changed at all about Obamacare, if that`s the reality and the final zeal. Do you think you`ve succeeded still in sort of re-establishing the tradition of nobody claims the debt ceiling as leverage? Or do you think that anything that was given away o Obamacare at all is a problem? LEE: We don`t know exactly what`s taking place, what will be in the Senate agreement. But I can tell you one thing, the American people understand that the radical right wing Republicans have held this country hostage, they created this shutdown, people need to go back to work, government services meet to be provided and we must pay our bills and we should not default on our debt. None of these issues should be negotiated. This is a given. We pay our bills and we keep the government open. The rest of the world is looking, watching us and can you imagine what people are thinking? Here we are saying that we`re going to negotiate or at least the radical Tea Party extremists want to negotiate on paying our bills and want to negotiate to open up the government. That is unacceptable. We need to pass what we call a C.R., which is a budget bill, at a level that I detest really, it`s too low with the sequester level. But we need to pass that so we can get to a real budget committee and begin to talk about how we move forward. That`s what we need to do. We`ve compromised quite a bit. So we need to put the bill up. We need to ask the speaker to have some courage, I know that there are enough Republicans to vote for that bill. We need to do that and move on. KORNACKI: All right. Congresswoman Barbara Lee, Democrat of California, member of the House Committee on the budget, thanks for joining us tonight. If the Democratic Party is as united as we`ve ever seen, the Republican Party is as divided as we have ever seen it. A 19th century warning for the GOP, that`s coming up. (COMMERCIAL BREAK) KORNACKI: This was the scene earlier this afternoon inside the Oval Office at the White House. President Obama meeting with House Democrats, meeting with his Vice President Joe Biden. Joe Biden sitting in that room today alongside President Obama, Joe Biden getting plucked out of the Senate in 2008 to become President Obama`s running mate is a move that changed the course of American history in ways that we are all living with today. I`ll explain that coming up. (COMMERCIAL BREAK) KORNACKI: There are a couple of ways of thinking about the Republican Party dysfunction that`s at the heart of all the suspense now playing out in Washington. One is that it`s just a phase, that the Tea Party uprising has temporarily paralyzed the GOP. It`s helped to elect dozens of true believers, far right, anti-government purists who pried themselves on standing up not just to the Obama White House but also to their own party`s leadership in Washington. It`s also scared the daylights out of Republican office holders who aren`t true believers but they bite their tongues and play along with the Tea Party anyway because they don`t want to be its next victims. This is basically the story of John Boehner`s speakership. But maybe, maybe it will all pass. The poisonous poll numbers will take a real toll and scare some of the true believers straight. The business community, as the party`s financial backbone, maybe that will reassert itself, maybe the passions of the base will cool off. The true believers will slowly realize that they can`t get everything they want if the party isn`t big enough to win national elections. That is the happy ending the Republican Party establishment is hoping for. It won`t happen next week, it won`t happen next month, but eventually they hope, the GOP will evolve back into a relatively healthy, relatively functional political party. But when you watch the extraordinary lengths, the increasingly extraordinarily lengths that John Boehner has to go through, just to do things like averted default, and the fact that we`re sitting here on the eve of a default and we`re still not sure how actually be able to avert one, well, it raises another possibility. What if this isn`t just a passing phase in the history of the Republican Party. What if we`re actually living through a bigger, more fundamental turning point? It`s probably worth remembering here the political parties don`t have to be permanent. We think of the Democrats and Republicans as ageless, eternal entities and they have been the two major parties in the country for 150 years now. About the only thing that the party has kept for all those years is it`s name. Once upon a time, there was no region more in love with the Democratic Party than the South, the white segregationist South. Through a series of dramatic events in the middle of the 20th century, when Harry Truman integrated the military, when northern Democrats pushed through a civil rights plank in 1948, when LBJ signed the Civil Rights Act in 1964, which through a series of events like that that the white South split off from the Democratic Party. Not coincidentally, that series of events also marked the berth of the modern Republican Party. For generations after the civil war, there was basically no such thing as the Republican Party in the South, because the GOP had been the party of northern liberals, anti-segregation, pro-civil rights liberals. But when those white Southerners came up for grabs, the conservative movement of the Republican Party made common cause with them, and together they changed, they shaped and they defined the modern Republican Party. And sometimes parties don`t even get to keep their names. Sometimes they just disappear. Mentions the Whig Party might get you a laugh these days, but it was a real party leading up to the civil war. It was in alliance between business interest and more or less in the north and the slave owners in the South. The Whig sprang up in the 1830s to fight Andrew Jackson. They wanted to push for national bank, for infrastructure improvements, for schools. They wanted the federal government to create conditions favorable to commerce. Jackson and his party, the Democrats, preferred the idea of an agrarian nation. Some of the biggest names in American political history were Whigs. Henry Clay was one, Daniel Webster was one, some young congressman named Abraham Lincoln was one of them. And there were three Whig presidents in the 1840s and 1850s. The coalition that built the party, the coalition that the party depended on, it wasn`t stable. It became impossible to avoid the issue of slavery. On that issue there was just no common ground. The party fractured, and the Whigs of the North folded into the new anti-slavery party. They were called the Republicans, and the Whigs of the South became Democrats. And the Whig Party itself was then tossed in the scrapheap of history. I`m not here predicting right now that today`s Republicans are going to go the way of the Whigs. But if one thing is clear right now, is that the coalition that defines today`s Republican Party isn`t stable, at least not at this moment. Republicans have been the party of business for a long time. It`s where they raise their money. It`s where they recruit a lot of their candidates from. How many times have they invoked job creators these past few years? We`re watching right now the interests of the Tea Party and the interests of the business community diverge. Businesses terrified of the default. It hates the idea of a default. It can`t understand why a quixotic quest to defund Obamacare is worth linking to the debt ceiling. And the Tea Party? Well, it doesn`t seem to care that much. Establishment figures like John Boehner are stumped about what to do about this. Actually I`m stumped too, because I can`t see how the alliance between business money and Tea Party populism can last. It feels like something has going to have to give, something is going to have to give soon. Joining us now to tell us if that`s right is Norman Ornstein. He`s a resident scholar the American Enterprise Institute. He`s also the author of the book, "It`s Even Worse Than It Looks: How the American Constitutional System Collided with the New Politics of Extremism." Norm, we thank you for joining us tonight. I guess I`ll start with that point about what looks to me about the instability of today`s Republican coalition, with the business community on one hand and the Tea Party populace on the other. And it`s so striking to me how liberal the Tea Party populace ands their representatives in Congress seem to care about what business is telling them. NORMAN ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: I think that`s right, Steve. You know, it`s great to see you do history which is so rare on commercial television. But I`ll give you another historical analogy, which is you take it back to the 1940s when Robert Taft led another insurgent wing and a deep division in the Republican Party, really the main street conservatives against the Wall Street moderates, it was Wendell Willke and Tom Dewey, but the moderates prevailed. They prevailed up until Barry Goldwater basically was able to secure a nomination and he got whomped. And Ronald Reagan came in as one of those insurgents but, in fact, governed as a pragmatist. Now, what we`re seeing is real triumph of a wing that is much more radical than what Robert Taft represented. And the business community has no place to go. But it`s so difficult in our system for a third party to emerge or a party to splinter because it`s not likely to me that the business community or there`s no moderate wing really of the Republican Party left, the pragmatic conservatives will go over to the Democratic Party, and I don`t think they have the cojones or the resources at this point to basically win the party back from the more radical wing. So I think this is going to go on for a while and it`s possible we`ll see an independent candidate emerge for president in 2016. But I don`t see a bunch of candidates running for Congress or having any chance of winning. KORNACKI: Also, I`m glad you appreciate the history because we have got Taft, we have got the Whig Party, this is ratings gold for 9:00 in primetime I`m sure. But talk about that for a minute, I guess. I wonder sometimes when I look at what happened today in the House, when I look at John Boehner, he clearly wants to get this behind him. He`s clearly wanted to get this behind him for a long time. And he would like to be able to get Republicans to agree on what he`s proposing today. He`s undercut completely by an outside group. He`s undercut by a member of the Senate, Ted Cruz. He`s undercut by Jim DeMint, who left elected politics because he thought he would have more influence at an outside group. It seems like that`s a major source of dysfunction into today`s Republican Party and until you address that, anybody in John Boehner`s position isn`t going to be able to do anything. ORNSTEIN: You know, tribal media which have such enormous power, it`s talk radio, it`s cable television, it`s blogs joined with the new politics of money that`s given such enormous power to these outside groups, not the business groups so much but the more radical groups really have put enormous amount of pressure on establishment leaders. You know, Tom and I in the book you mentioned, we brought it up to date with a new paperback edition really have focused more on the outside forces than the inside ones, because the unfortunate really is that there aren`t going to be any reforms that are going to change this process. What we need is a counterrevolution from pragmatic conservatives to begin to put money in to counter the influence of groups like the Club for Growth, to have a more aggressive effort outside, to counter the Heritage Actions and bring their party back, not to be a moderate party or a liberal party, but a straight-forward and pretty ardently conservative party instead of a radical one. Right now, those efforts are very, very fledgling, and maybe this new debacle, which after all isn`t going way. We`re going to back again in January with Friday the 13th part four, we may begin to activate that. But we`re sure not there yet. KORNACKI: Well, yes, maybe you could pick up that point, what do you think happens with what we`re hearing January 15th, the government, if this all passes, if this gets resolved this week, January 15 would be the new deadline, February 7th would be the next debt ceiling default. Do you think Democrats have succeeded here at all changing the norms of the system so that Republicans won`t do this again, or do you think we will go through the brinkmanship again and do you think that Boehner having gone through what he`s going through right now would be able to do anything in that situation if this comes again? ORNSTEIN: I`ll tell you the truth, I`m fearful, because I think what the Limbaughs and Huckabees and Cruzes are going to be saying after all this is our spineless leaders folded. If they had only held on, if they kept the government shut, if they had gone through a default, which really wouldn`t do much of anything bad for the economy, then Obama would have cracked and we would have gotten what we wanted. I think that`s going to make life more difficult for both Mitch McConnell and for John Boehner when we get back to this in January. They`re not going to be closer to having a party that`s chasten, that realizes that they`ve damaged themselves deeply, and they better find another set of battlegrounds in which to fight. And I think that`s the problem with doing a short-term. Now, although, it`s obviously, the only thing available. KORNACKI: All right. Norm Ornstein, resident scholar at the American Enterprise Institute, author of the book, "It`s Even Worse Than It Looks: How the American Constitutional System Collided with the New Politics of Extremism," also, tonight our senior Whig Party analyst, -- Norm Ornstein, thank you for joining us tonight. ORNSTEIN: My pleasure, Steve. Thank you. KORNACKI: Still ahead, the political event that eventually led to this debt ceiling debacle in the first place. I`ll give you a hint, there`s a witch involved. (COMMERCIAL BREAK) KORNACKI: This is one of my Tuesday night traditions, cuing up the MSNBC election night music. And tonight, as an added bonus, there`s actually a real reason to let it play, because it is election night in the commonwealth of Massachusetts. Bay Staters went to the polls today to pick candidates for the congressional election in the fifth district. While I love any election anywhere in the country, this one is particularly exciting for me because the district is my home district. But I have to admit, this race is a bit obscure and it`s gotten much national attention, except for this particularly great campaign ad that went viral last month for one of the least likely candidates to win the race. (BEGIN VIDEO CLIP) STATE REP. CARL SCIORTINO, JR. (D), MASSACHUSETTS: I`m Carl Sciortino and I`ll never forget that conversation with my dad. CARL SCIORTINO, SR., SON RUNNING FOR CONGRESS: That`s me. CARL SCIORTINO, JR.: Where I had to come out and tell him -- CARL SCIORTINO, SR.: Wait for this. CARL SCIORTINO, JR.: -- that I was a Massachusetts liberal. CARL SCIORTINO, SR.: And he`s proud of it. CARL SCIORTINO, JR.: Dad`s in the Tea Party. CARL SCIORTINO, SR.: Damn right. It was bad enough him taking on the big banks and the corporations in the legislature. CARL SCIORTINO, JR.: They weren`t paying the fair share paying their fair way in taxes. CARL SCIORTINO, SR.: And he wrote the buffer zone law. CARL SCIORTINO, JR.: To protect women entering abortion clinics from harassment. CARL SCIORTINO, SR.: It`s gone all the way to the Supreme Court. I was kind of proud of that. CARL SCIORTINO, JR.: But here`s the one that drives him crazy. CARL SCIORTINO, SR.: He wants to go to Congress, take out the NRA, and the Tea Party. CARL SCIORTINO, JR.: I won`t give up on an assault weapons ban. CARL SCIORTINO, SR.: Or universal background checks, or banning high- capacity magazines. CARL SCIORTINO, JR.: There are some things you don`t stop fighting for. Also the right to choose, equal pay for women, and equal rights, for - - well, everybody. CARL SCIORTINO, SR.: He`s been like this for 35 years. CARL SCIORTINO, JR.: It`s why I approve this message. And I still love you, dad. CARL SCIORTINO, SR.: Me too, son. (END VIDEO CLIP) KORNACKI: The State Representative Carl Sciortino who before that perfectly edited campaign had next to zero chance of actually winning tonight`s Democratic primary. His ad which was seen by hundreds of thousands of people on the web alone, put Sciortino on the map and gave him some visibility in a very crowded feel. There were seven Democrats who were running to replace long time Congressman Ed Markey who won the race to replace now Secretary of State John Kerry in the Senate. Markey held the seat for 37 years. He first won it back in 1976. He actually won it with a very catchy campaign ad that`s famous in Massachusetts. It`s a heavily Democratic district in the suburbs of Boston. It is one of the bluest in the state that`s already very blue, making the primary tonight pretty much the deciding election for this congressional seat. And the results are now and we can tell you that with 90 percent of the precinct, State Senator Katherine Clark has been declared the winner with 33 percent of the vote. Carl Sciortino came in third place tonight with 16 percent. Tonight`s Democratic nominee, that is Katherine Clark, she will go to on face Republican Frank Addivinola, who took the GOP nomination this evening. Special election will be held in December. It looks like Katherine Clark, though, is going to Congress. This has been a banner year for special elections. The next one when voters go off to the poll in the special Wednesday election to pick the new U.S. senator. Democrat with national appeal, Newark`s mayor, Cory Booker, or Tea Party Republican, Steve Lunegan. Watch this space. (COMMERCIAL BREAK) KORNACKI: So here we are. Not for the first time in the last three years asking whether John Boehner will be able to survive putting on the House floor a bill the Tea Party will hate. Here we are asking, yet again, whether even House Republican who in their hearts would decide it`s in their political self interest to vote no anyway. This is story that led us to the moment, 26 hours from the default deadline. It`s the story that led us into the shutdown. It`s the story that took us from one pointless, one destructive, one maddening episode of brinkmanship to another ever since Republicans gained control of the House. It`s the story of why a sophomore Republican House member with no leadership position, with no legislative accomplishments named Tim Huelskamp, why he can threaten as he did today, fellow Republicans with primary challenges and why those fellow Republicans will take him seriously. And to understand all of this, to make sense of what seems to be an endless string of moments like this, all you have to do is go back to one specific night, three years ago. The evening of September 14th, 2010, in the state of Delaware. (BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: Christine O`Donnell virtually unknown a few weeks ago. This morning, she is officially the GOP candidate for the Senate seat vacated by Vice President Joe Biden. UNIDENTIFIED MALE: O`Donnell defeated nine-term representative Mike Castle in Delaware`s Republican Senate primary. She`s now the sixth Tea Party candidate to win a primary race this year. (END VIDEO CLIP) KORNACKI: And I really think that day and that race is the root of everything we`re living through right now. Of the political stalemate that is basically defined Washington for the last two years and it promises to do so all the way through the end of Barack Obama`s presidency at least. That Delaware Senate race explains it all. It explains the basic nature of the Tea Party movement. It`s a conservative uprising that begun when Barack Obama became president, but it`s an uprising that wasn`t just directed at Obama and the Democrats. It`s an uprising that was also aimed at Republicans, because of how the conservative base, how the Tea Party, chose to explain Obama`s election in 2008. They couldn`t tell themselves their ideology had been repudiated by the rest of the country. That Americans had rejected conservatism and embraced the left of center philosophy. So, instead, they came up with story that blamed George W. Bush and it blamed the Republicans in Washington who supported him. They`re telling, Bush betrayed the cause as president. He spent too much money. He attacked government too little. He bailed out the banks. He had given conservatism a bad name which left voters desperately searching for a new direction, which led them to Obama. That`s how the Tea Party retroactively assess the Bush years, how it explained Obama`s victory. How the Tea Party became something of a purification movement to cleanse the party of the sellouts who helped Bush, who spoiled conservatism, who helped elect Obama. And Mike Castle, the guy who lost to Christine O`Donnell, was the textbook Republican. He`s been in Washington for 18 years. He`s been in politics a lot longer. He was a moderate Republican. He`d work with Democrats. He voted for No Child Left Behind, the Medicare prescription drug plan. He voted for TARP. Mike Castle was exactly the kind of Republican the Tea Party rose up to fight. 2010 Delaware Senate primary also explains the depth of the base`s desire to purge Republicans like Castle. He was a former lieutenant-governor, a former governor, an eight-term congressman from the state`s lone district. He was impeccably credentialed. And he opposed by a gadfly with no name recognition, no money, no experience and incredible, obvious political baggage. (BEGIN VIDEO CLIP) CHRISTINE O`DONNELL: I`m not a witch. I`m nothing you have heard. I`m you. None of us are perfect. But none of us can be happy with what we see all around us. I`ll go to Washington and do what you`d do. I`m Christine O`Donnell, and I approve this message. (END VIDEO CLIP) KORNACKI: And that gadfly candidate who had to pay money to tell people she wasn`t a witch, she won the primary. O`Donnell`s victory showed as far as base was concerned, literally anyone was better than some one like Mike Castle, who had experience and money and endorsement of the Republican Party. (BEGIN VIDEO CLIP) MIKE CASTLE (R), FORMER U.S. CONGRESSMAN: The last several weeks have been spirited shall we say. And the voters in the Republican primary have spoken. I respect that decision. I would like to thank the Republican Party for its support. I had a very nice speech prepared here, hoping I would win this race. (END VIDEO CLIP) KORNACKI: The primary also explained how little Tea Party cares about winning elections. Outside of the GOP base, Castle was immensely popular in Delaware. He was a general election shoo-in. He`s a guaranteed Senate seat pickup for the GOP. O`Donnell was a guaranteed loser, a fringe, far right figure in a blue state. This was obvious on primary day. But the base picked O`Donnell anyway. Of course he was crushed in November, and Democrats won the Senate race they were otherwise going to lose. That whole story, how Castle was targeted, how Castle was beaten, whom Castle was beaten by, that story is the Rosetta Stone of Tea Party era politics. If you understand what happened to him, why it happened to him, you understand everything that has gone on in Washington since then, why we are in a shutdown and why we are staring down the barrel of debt default now. Because the story of Mike Castle and Christine O`Donnell sums up the threat that every Republican member of Congress lives with every day. If they`re judged to be conservative, if they`re judged to be disloyal to the cause, disloyal to the tribe, if they give an inch of space on their right, they could become the Tea Party`s next target. If the Tea Party targets you they can beat you with anybody. That`s the lesson of Delaware. That`s the lesson lives in the office of every Republican member of Congress. September 14th, 2010, we are living with what happened that day. And as long as we are, there is no obvious way out of the mess that is Washington these days. That does it for us tonight. Rachel will be back tomorrow night. Remember, you can see my show "UP" weekend mornings at 8:00 Eastern. Now, it is time for "THE LAST WORD WITH LAWRENCE O`DONNELL". Have a great. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. END