'Countdown with Keith Olbermann' for Tuesday, July 6th, 2010
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The toss: Afghanistan day 1

Guests: Bob Cavnar, Eric Bates, Barney Frank, Chris Hayes

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KEITH OLBERMANN, HOST (voice-over): Which of these stories will you be talking about tomorrow?

Day 78, the newest scandal: a month before Deepwater Horizon blew, BP promised, in the event of catastrophe it could skim and remove nearly 500,000 barrels of oil each day. It couldn't.

And the oil spreads to the Pentagon. Why 11 weeks later is the Defense Department still getting most of its fuel and petroleum, $980 million a year's worth, from BP?

The newest victims: tar balls north of New Orleans, and in Texas.

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GOV. RICK PERRY (R), TEXAS: I want to assure Texans that we are taking aggressive steps to address this situation and to mitigate any effects to our beaches.

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OLBERMANN: We're going to secede again?

The Justice Department files - Arizona S.B. 1070 usurps federal authority on illegal immigration. The GOP holds a race for the fastest knee-jerk - McCain, Kyl, Boehner, the early leaders.

Sacred cow - and a time in which the most liberal economists and the most conservative fringers believe in reviewing every penny spent, two congressmen from opposite end of the spectrum say: cut the defense budget. Our special guest: Congressman Barney Frank.

Sharron Angle shutters her Web site - her words for the primary so off-the-wall she doesn't want them seen during the election. So, when Harry Reid's campaign resurrects those words, Angle threatens to sue.

And the worst "Worsts" in months:

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RUSH LIMBAUGH, RADIO HOST: He wouldn't have been voted president if he weren't black.

Somebody asked me over the weekend - whom I can't remember - somebody asked me over the weekend why does somebody earn a lot of money, have a lot of money, because he's black.

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OLBERMANN: So, who was the black person who Limbaugh thinks was made "wealthy and big and famous and so forth" only because they were black? You will not believe it.

All the news and commentary - now on Countdown.

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LIMBAUGH: What kind of idiot am I?

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OLBERMANN: Good evening from New York.

First, the news of tar balls in Texas meant it was now unanimous.

Every Gulf Coast state has been stained by the BP disaster.

But, now, on our fifth story: something more ominous still for its immediate fact and its long-term implications, the city of New Orleans is tonight surrounded by oil, even though it is 100 miles inland. The crude from the Deepwater Horizon gusher having reached all the way into Louisiana's Lake Pontchartrain. Officials are saying they have pulled more than 1,600 tar balls from the waters there so far, the same waters that overtop the levees and flooded New Orleans after Hurricane Katrina.

Winds from Hurricane Alex are being blamed for pushing the crude 100 miles northward to Pontchartrain, the huge estuary that forms the crescent city's northern boundary. The area having been fortunate that strong winds have been largely absent this summer - until now.

To the west, as we mentioned, more tar balls washing up in Texas for a second consecutive day. Those winds also are hampering the cleanup efforts, causing rough seas that are making it difficult to skim the water's surface.

A company in Canada having hit upon a novel solution for cleanup oil spills, like this one long ago - dehydrated peat moss, not only capable of soaking up crude, which does not leak out afterwards, but microbes inside the moss break down the oil as well.

Toronto's newspaper, "The Globe and Mail," is reporting that a company in Edmonton sells its swarm of peat moss for exactly this purpose all around the world, doing $1 million in annual sales to the U.S. alone.

So, why isn't BP using this peat moss to soak up part of the spill? The owner of the peat moss company telling that newspaper BP has informed him it cannot use peat moss because the oil giant would not then be able to retrieve the oil afterwards. And you may translate that as: the oil giant would not be able to sell the oil afterwards.

BP and its co-conspirators are also gaining from previously unreported tax benefits. It's allowed to write-off the rent it paid for Transocean, the company that owned the Deepwater Horizon, in order to lease the oil rig. That saves BP hundreds of thousands of dollars a year.

Transocean, meanwhile, having fled first to the Cayman Islands and then to Switzerland to lower its corporate tax bill by almost 15 percent.

The Center for American Progress counting nine different subsidies that the U.S. government gives to an industry that makes more money that any other industry, including refunds for drilling costs and refunds to cover the cost of searching for oil. Subsidies for oil and gas companies make up 88 percent of all federal subsidies, just cutting the oil and gas subsidies out would save the U.S. government $45 billion every year.

From the outrageous to the absurd - it proved today that during the 1970s, BP put its name on a board game called Offshore Oil Strike about the thrills of drilling. Rediscovered by the U.K. "Metro" newspaper, the game clearly never rivaled Monopoly, but the parallels between it and the current disaster nothing if not eerie.

The rules roughly this, according to Boardgamegeek.com: Two to four players taking the rules of BP, Amoco, Chevron, or Mobil, compete in the North Sea, exploring for oil, building platforms and laying pipelines to bring offshore oil back to the player's home company. First player to make 120 million wins, but players must avoid dreaded hazard cards which read "blow out," "rig damaged," "oil slick cleanup cost," pay $1 million. How quaint.

Time to call in oil and gas industry veteran, Bob Cavnar, now with "The Huffington Post" and the "Daily Hurricane."

Bob, thanks again for your time again tonight.

BOB CAVNAR, OIL AND GAS INDUSTRY VETERAN: Good evening, Keith.

Thanks have for me.

OLBERMANN: So, if the levees were again to break in New Orleans following another storm or they were to break for something lesser because, once again, they've been filled in some places by copies of the Sunday edition of "The Times-Picayune" newspaper - this time, the city would be flooded with an oily toxic mess rather than just ordinary water?

CAVNAR: There's a real possibility of that, Keith. When the oil reached Lake Pontchartrain this weekend, it really showed that the booming techniques that they've been using for these last 78 days just simply don't work on anything beyond millpond level water. And so, they've got a real problem if they have a storm come across into New Orleans.

OLBERMANN: We know that Hurricane Alex is only the start of the Atlantic season. And Alex managed, even though it was not very impactful on the United States, to push some of the oil from Deepwater Horizon into Pontchartrain. Do we then have any guess? Are there any limits to what a real, quote-unquote, "hurricane" could do with the spillage from Deepwater Horizon relative to in-land, relative to the rest of the Gulf Coast?

CAVNAR: Right now, Keith, that is my serious concern. You know, right now, we can't buy a break. The three subtropical or tropical depressions that have been in the Atlantic this year have all been in the Gulf, and there's one over the Yucatan now that has an average chance of becoming a hurricane. And the forecast track is farther north.

Even if it doesn't come close to where the operation is, the wave action really shuts the operation down and makes skimming virtually impossible.

OLBERMANN: I mentioned at the start of the show there was apparently a month before the rig blew, there was an estimate provided by BP that it could skim and recover up to merely, I think it was 491,000 a day from the surface.

CAVNAR: Yes. Right.

OLBERMANN: We're now at - we're now at 78. Obviously, that prediction was bizarrely wrong. Is 78 days adequate time to have contained oil, even if it wasn't 500,000 a day, so it didn't get to Texas, didn't get to New Orleans? I mean, how much is that attributable to planning or failure to plan for the disaster and BP's failures in the days since?

CAVNAR: It's 100 percent due to lack of planning. Remember, Keith, in the deep water, there was never going to be a spill. There was never going to be a blowout. There was no accommodation made for that eventuality. So, all of the technology, all of the skimming, all of the equipment that they have designed is 30 years old and never intended for this kind of use. So, it's all bad planning.

OLBERMANN: Bob, the peat moss story - they were told by BP, this company, this Edmonton company, that they would - they couldn't do this because they couldn't essentially reclaim the oil, therefore, resell it. Do you buy that? Does that sound logical to you, that that would be a major corporation's response to something that might just help a little bit in the middle of a disaster in which the company's reputation is sliding away along with every ecological thing we need to preserve in the Gulf?

CAVNAR: You know, since they're burning off about 8,000 or 9,000 barrels a day on the Q4000 offshore, I'm not so sure the lack of recovery and the peat moss thing was the issue. But clearly, the peat moss does work close to shore and level water. And I think it was more BP just dismissing every idea but their own. It's kind of not in my own backyard kind of thing. It's not invented here.

So, they just rejected most all of the ideas. Virtually 99 percent of the ideas have been rejected by BP to help clean this out.

OLBERMANN: Well, fortunately, they had planned for it and they had better ideas. Oh, that's right, they had none whatsoever.

Oil industry expert, Bob Cavnar - as always, Bob, great thanks.

CAVNAR: Thanks for having me, Keith.

OLBERMANN: A little bit more on these tax breaks. "Rolling Stone" executive editor, Eric Bates, is at the news desk with me.

And thanks for coming in tonight.

ERIC BATES, ROLLING STONE: Thanks for having me.

OLBERMANN: Forty-five billion annually. It's 80 percent of all federal subsidies. And, of course, it goes to the industry that is the most profitable of all industries.

If the government changes anything in the wake of this - would, in fact, the most useful thing for society be changing this and then addressing some of the ecological problems?

BATES: It might be one of the most useful things, I think, if one of the least likely things they're going to do.

In the middle of depression, the oil industry is one of the few areas of the economy that's doing well. They want to keep that going. They make a lot of money off of these leases and they want to keep that coming in. In fact, that's the argument they made to appeals court, that they told them that the Bush rules on drilling were ridiculous, they said, we got to use those rules because we need the money.

OLBERMANN: The peat moss story, if it - if it could be impactful in any way, as Bob Cavnar says, even at, you know, the stable water, which presumably you could throw some of that in Lake Pontchartrain right now and help that situation to some degree, why either is the government not telling BP to do it and simply doing it and sending BP the bill, and we're just using the peat moss as an example of any one of the hundreds useful ideas?

BATES: That's the real question, because the federal government, by federal law, is in charge of the cleanup.

OLBERMANN: Yes.

BATES: And it's responsible for doing it - whatever BP does or doesn't do, or it says, or it doesn't want. So it's the government's responsibility to go in. But from the start, they weren't making sure that the company and the industry had enough resources at hand to handle this - any kind of spill that happened, let alone this catastrophic.

OLBERMANN: Based on what you reported and what you've seen about this, how - what degree is the federal government complicit in the failures of BP by inadequately supervising them both before and in the seven weeks or the eight weeks since?

BATES: It's more than complicit because the federal - it couldn't have happened without the federal government. Bush broke the system. Obama knew it was broken and said it was broken and failed to fix it.

The government is responsible for making sure that this stuff was policed and that the resources were in place - and it did neither of those things. In fact, it did the opposite. It approved leases at a record pace. And Salazar's first year, 53 million acres were put up for bid in the Gulf, an all time high.

OLBERMANN: False equivalencies abound in the time of disaster like this. We've heard questions about why it was so easy for the president to get rid of Stanley McChrystal in a matter of days, but he hasn't been able to stop the BP leak, as if he could down and put his finger in the dyke. On the other hand, reporting done by your magazine turns Stanley McChrystal's career around and possibly affected what's going to happen in Afghanistan, and all took place in a span of a week.

Is there any explanation for why this event, as it has unfolded for nearly 80 days, has not seemingly had any impact on a cabinet secretary whose job it is to prevent things like this from happening or to mitigate them as best as humanly possible if they do happen?

BATES: It raises the question of how much you have too screw up that job in order to get fired.

OLBERMANN: Yes.

BATES: But it's also worth noting in the McChrystal firing, the reason given wasn't because of the job he was doing or the policy - the policy was kept in place. That's the real question whether Salazar goes or not, are you going to clean this up, or are you going to somebody in who has the moral clarity and the management expertise to initiate top-to-bottom reforms in the Interior Department, because that's what's needed.

OLBERMANN: Is there some sense that if a change were to be made, that the whole thing, not that's ineffective response whatsoever, but what limited effective parts of the response would they grind to a halt if Ken Salazar was thrown out on his ass tomorrow?

BATES: I don't think Salazar at this point is really that involved in overseeing the response. So, I'm not sure they're getting really the mode to make that much of a difference. I think it's more a question of politics. Obama came into office running against the "drill, baby, drill" crowd. Salazar appeases that crowd because he is, in fact, a big proponent of drilling.

OLBERMANN: Eric Bates, executive editor of "Rolling Stone" - great thanks for coming in.

BATES: Thanks for having me.

OLBERMANN: The other shoe drops in Arizona today. The Justice Department finally sues the state, claiming its "show us your papers" law usurps federal authority.

The Republican blowback predicated on the illusion that Arizona's law has a damn thing to do with protecting the borders.

That's next.

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OLBERMANN: The attorney general finally acts, Arizona's "paper please" law is unconstitutional. How the far right howls tonight.

He and Ron Paul agree time to cut the defense budget. He joins us - even as a Middle East diplomat urges this country to, quote, "stop the Iranian nuclear program by force."

A politician is so proud of her past words that she threatened to sue to stop access to them during the election.

And standing up for the oppressed people of this nation against the privilege class, the African-Americans. His racism refrain that the president didn't earn his job is old news, but now, he has extended that racism to a black person perhaps more famous than the president.

Ahead on Countdown.

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OLBERMANN: Defense of Arizona's "papers please" law has to this point largely been left to vigilantes, white power extremists, and a governor who makes up stories about her own citizens being beheaded in the desert.

In our fourth story: Somebody will finally have to try to defend it with facts and against testimony from some of his state's own law enforcers. The Justice Department has finally filed its lawsuit to stop the state of Arizona's new "papers please" immigration law, claiming the law is unconstitutional.

Today, the Justice Department said that Arizona's S.B. 1070 usurps federal authority because it requires local law enforcement to enforce immigration laws which are national things. And the lawsuit seeks a preliminary injunction to stop the law from taking effect on the 29th of this month.

Today's filing also included declarations from Arizona law enforcement saying S.B 1070 will actually hamper its ability to police local communities.

The attorney general, Eric Holder, in a statement, acknowledged the problem facing Arizona, but added, quote, "Seeking to address the issue through a patchwork of state laws will only create more problems than it solves."

GOP denunciations of the federal lawsuits: swift, universal and cliched. From Arizona's governor, Jan Brewer: "As a direct result of failed and inconsistent federal enforcement, Arizona is under attack from violent Mexican drug and immigrant smuggling cartels. Now, Arizona is under attack in federal court from President Obama and his Department of Justice."

From the two Republican senators from that state, John McCain and Jon Kyl: "The American people must wonder whether the Obama administration is really committed to securing the border."

The Senate minority leader, Mitch McConnell, sticking to the team:

"Suing the people of Arizona for attempting to do a job that the federal government has utterly failed to execute will not help secure our borders."

And from House Minority Leader John Boehner, who would be in trouble in that state if ever pulled over, "States have a right and responsibility to ensure order and safety of their citizens, especially when the federal government is asleep at the wheel."

Let's turn now to "Newsweek" magazine's senior Washington correspondent and political columnist, MSNBC political analyst, Howard Fineman.

Howard, good evening.

HOWARD FINEMAN, MSNBC POLITICAL ANALYST: Orange people have rights, too.

OLBERMANN: There you go. Absolutely. I agree with you on that, even if Mr. Boehner does not.

Separating out the right and the wrong in this for a moment. Whatever the outcome of the suit, in a sense, did the administration possibly just say to the GOP, here you take the first shot at us. Here's the political gun?

FINEMAN: Yes, sure. And they knew that was going to happen, as you say, it was cliched. This comes out of the Republican playbook going back decades if not generations at this point, Keith. The keyword in all of the statements was the word "secure."

The Republican argument for generations has been: the Democrats are weak on defense in one way or another, that they're going to try to cram this into that Rubric, and that's what they started up doing tonight.

I had a long interview the other day with Senator Lindsey Graham, who only a few years ago, was a leading right of immigration reform. He was one of 11 Republicans in 2006 voted for the McCain/Kennedy reform bill. Lindsey Graham said to me in the interview that I had, no way. This border needs to be secured first. That's what we have to do, secure, secure, secure.

So, that gives you an idea where things are headed.

OLBERMANN: Would the best political argument against this law be - to let it to be enforced? And would the worst argument against it, to have it stayed by a court during a midterm election period?

FINEMAN: Yes, politically, that's right. I mean, if you read the Arizona law, which I have and studied it, if they were to enforce that to the letter, the scene would be somewhere between the Keystone Kops and the World War II internment of the Japanese. I mean, they would be arresting people right and left, they would be stopping everybody at traffic lights, they would be overloading the federal system because they'd be transporting the people that they captured to federal authorities.

And, of course, that's the entire intent of this. It's sort of like the political or legislative equivalent of - a legislative equivalent of a work-to-rule, you know, work stoppage kind of thing, to try to clog up the system on purpose. It would create mayhem, and the sight of that on national TV, I think, would be very damaging to the Republicans and to that cause.

Conversely, if the order is stayed by a federal judge, and I don't think we know yet who that federal judge is, that person is being picked right now, especially with the government of Mexico filing a friend with a court brief, which is going to be heard in court, that will just more fodder for the Republicans.

OLBERMANN: Beyond this initial about this tit-a-tat about this, and the knee-jerk reactions, are there ways - do the Democrats have ways to reframe the issue so they're not flooded with words like amnesty and not protecting the borders and the one you used, the "secure" word?

FINEMAN: Well, I think it's difficult, but I think the best defense might be a good offense here. Good offense might be the best defense. I think if the - if the Republicans are going to insist on framing this as a national security issue, and, by the way, what the court - what the filing by the government says is we have to prioritize our national security issues, I'd say the Republicans are fine.

You want to - you want to spend $100 billion building a gigantic state-of-the-art fence, you want to send troops to the border, you really want to secure that border, it's going to cost - I don't know - $100 billion, you tell me, Republicans, where you're going to take that out of the defense budget. Take it out of Afghanistan, take it out of Iraq. If you want to spend it, fine.

And I think the president could call their bluff that way.

OLBERMANN: Why doesn't he do that? Why isn't in that plan? Why isn't there another request for time later in this week?

FINEMAN: I don't know. I don't know. But I think that's the way you got to do at them, it seems to me, that you have to play their game better than they do.

OLBERMANN: Seriously, what does the president have in mind? Do you have any idea?

FINEMAN: I think what he has in mind is to try to get some grand compromise somewhat to the right of where the McCain/Kennedy bill was. The Schumer bill that they're working off - the Chuck Schumer bill - is really much, you know, much more to the conservatives' liking than the one of a few years ago. It's the conservatives like Lindsey Graham and the others are refusing to play ball. As long as no Republicans are willing to take part in this, it's very difficult for the president, and they know that.

OLBERMANN: Howard Fineman of "Newsweek" and MSNBC, as this political debate ratchets up - thank you, Howard.

FINEMAN: Thank you, Keith.

OLBERMANN: A bipartisan bid to cut the Defense Department budget.

You heard me.

And Rush Limbaugh's racism towards this president is nothing new. But today, he directed it at somebody perhaps even bigger.

Ahead on Countdown.

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OLBERMANN: Cutting the un-cuttable, Congressman Barney Frank on his bipartisan push with Ron Paul, to trim the defense budget.

First, the nightly sanity break, and we begin with the Tweet of the Day and a question from Sam Vance. "Would graduates of Beck U be considered Lonesome Rhodes scholars?"

Very nice. Who said anything about anybody graduating?

Let's play "Oddball."

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OLBERMANN: To Coney Island, New York. Nathan's Annual International Hotdog Eating Contest winner, Joey Chestnut, consumed 54 in 10 minutes. It's not his personal best. He won 68 a year ago. It was really hot.

This year's scene-stealer was six-time champ Takeru Kobayashi who watched from the sidelines along with fans who wore with Free Kobi t-shirts. Free Kobe B.? Yes.

But after the contest he tried to force his way on the stage and was stopped by Nathan's security, the hot dog police, along with the N.Y. police. Kobi was charged with trespassing and resisting arrest, obstructing governmental administration, but he was released from jail today saying he was hungry.

That's right, American society has sunk to this: brawls during exhibition of public gluttony.

Buenos Aires, hello! And a supposedly brand-new concept, a hotel designed for sleeping, a nap hotel. That's right, just for naps. Yes, they have them at Japanese airports.

This place calls itself Selfishness. We have a long line for that. And patrons may rent a small room for $30, limited to 45 minutes, enough time for a nap but not enough time for deep sleep.

The hotel is banking on the idea that the siesta will make a comeback in the city's business district. Selfishness even provides sleep and relaxation professionals to coach their customers. Get your mind out of the gutter. Patrons are encouraged to slip off their shoes, but nothing else.

Congressman Barney Frank on an inarguable conclusion: we must cut the Pentagon budget - next.

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OLBERMANN: The Tea Party enjoyed a rare success today, rare especially because the success it scored today was a success that progressives have sought for decades. Our third story tonight, the Tea Party spiritual founder joins forces with a progressive Democrat to save a trillion dollars in the federal budget over the next ten years, by cutting military spending.

That's right. Texas Congressman and military veteran Ron Paul wants to cut Pentagon spending. His progressive partner in this joins us presently. The Pentagon's budget for 2010 is 693 billion dollars, more than all the government's other discretionary spending combined. If you subtract the wars in Iraq and Afghanistan, it still accounts for more than 42 percent of total discretionary spending.

The U.S. spends more now on military spending than it did during the Cold War. It spends more on military spending than Russia, China, all the Middle East, all of NATO and all the rest of Europe combined. Operating 11 large nuclear powered carriers - no other country even has one - a navy that can carry twice as many aircraft at sea as everyone else in the world combined, 57 nuclear submarines, more than the rest of the world combined, according to the Center for Arms Control and Non-Proliferation, with 460 military installations around the globe in 38 countries, not including Iraq and Afghanistan.

Defense Secretary Gates has already called for cutting 100 billion, asking Congress not to include hundreds of millions for more C-17 jets and for an alternate backup engine for the F035, even getting President Obama to threaten to veto if the funding is in the defense bill.

Nor is Ron Paul the only Tea Partier to suggest Pentagon austerity. Tea Party Patriots coordinator Mark Meckler telling "Politico" last month, "I have yet to hear anyone say we can't touch defense spending. Any Tea Partier who says something else lacks integrity."

Cue Sarah Palin. The Tea Party blogger posting on Facebook last week, quote, "this administration may be willing to cut defense spending." Actually, Obama is raising it one or two percent. "But it's increasing it everywhere else. I think we should do it the other way around, cut spending in other departments apart from defense."

Palin and the military contractors aided and abetted by saber rattles, both here and abroad. United Arab Emirates ambassador to the U.S., Yousef Al Otaiba - Yousef Al Otaiba, forgive me - today calling on the U.S. to launch the third war against Iran, because "or else, the United Arab Emirates will move toward Iran."

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UNIDENTIFIED MALE: Do you want the United States to stop the Iranian nuclear program by force?

YOUSEF AL OTAIBA, UNITED ARAB EMIRATES AMBASSADOR TO THE U.S.:

Absolutely. Absolutely. I think we are at risk of an Iranian nuclear program far more than you are at risk. UAE is the most vulnerable to Iran. There are many countries in the region - if they lack an assurance that the U.S. is willing to confront Iran, they will start running for cover towards Iran.

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OLBERMANN: As promised we're joined now by Ron Paul's unlikely cohort in this effort, Democratic Congressman Barney Frank of Massachusetts. Great thanks for your time tonight, congressman.

REP. BARNEY FRANK (D), MASSACHUSETTS: Thank you, Keith. Thanks for a very thoughtful introduction.

OLBERMANN: Oh, I'm glad you liked that. Did you figure out a way to cut military spending, however, with Sarah Palin and the United Arab Emirates saber rattling?

FRANK: I would suggest to the United Arab Emanates that it they think America should keep up its military budget, I would be willing to let them rent some of it. This is really the epitome of the issue. We have some very wealthy nations that have decided that we should go fight their battles for them.

I want to deal with Iran, but this notion that everybody in the world cuts their military spending has no military budget at all and hide behind us is crazy. If you ask the American people what's unpopular in the budget, foreign aid always comes up high. The fact is that foreign aid of the kind that helps poor children or fights AIDS in Africa, that's not very much money.

The most expensive form of foreign aid is the aid we give England and Denmark and Italy and Japan by allowing them to have a military budget that's very small, because they hide behind us. The time has come - frankly, let me put it this way. I think the most popular book in Europe and wealthy parts of Asia is "Tom Sawyer." It's time for us to stop painting the fence.

OLBERMANN: Do you think maybe Congressman Paul has given progressives enough political cover that the president might include cuts or work this into his commission on spending?

FRANK: I'm not sure the president will. It's the one area where I've been disappointed in the president. I think he gets intimidated by this notion that you look weak on defense. By the way, I want to fight terrorism. But those nuclear carriers you talked about, which are extremely expensive, don't stop terrorists. Super-duper nuclear submarines don't fight terrorists.

This money diverts resources from a focused effort on fighting terrorism. But here's what I think changes it, Keith: we're in a situation now where the deficit has to be cut. Everybody understands that. If we don't put military on the table, the extent to which we are defending Western Europe - I have no idea what we are defending them against. If they were scared, they could spend their own money.

We have 15,000 Marines on Okinawa. I think most people thought the Marines left Okinawa when John Wayne died, even though he never went there himself. Here's the deal, if we don't cut that, then forget about environmental protection, forget about waste - Superfund sites. forget about better health care.

As you pointed out, if you don't cut the military - deficit reduction is coming - everything else gets but butchered. I think the need to make some tough choices will finally focus my colleagues on this. By the way, in addition to Ron Paul, I have Walter Jones, a very conservative Republican from North Carolina, the Cato Institute, which as you know is one of the leading intellectual aggregates for conservatism, is part of the task force we put together.

I think Americans are now going to understand either we allow the European allies to have defense budgets that are half of ours in percentage terms for their gross domestic product, or we make savage cuts in our own domestic programs, or excessive tax increases. I'd like to see taxes go up some, but they can go up too high. I think, finally, my colleagues will be forced to make that choice.

OLBERMANN: Mr. Jones, who you mentioned, as I recall, the originator of the Freedom Fries thing during the run-up to the Iraq War. But now let me ask you the obligatory not in my own backyard, devil's advocate question. It's your backyard and, to some respect, it's my backyard, too. Secretary Gates told Congress don't fund a backup alternate engine for the F-35. It's not needed. But the engine, which is made by a parent company of the network I work for, GE, brings jobs to Massachusetts and you support it. If you can't cut local military spending, how can the nation cut national military spending?

FRANK: Two things. First of all, I am for cutting - it becomes easier politically, but also we don't get any jobs for Marines in Okinawa and bases all over the world. Secondly, I have said about the F-35, I would vote to cut the whole program. I have a two-fold approach to military spending. I would vote to cut the airplane. I voted to cut the F-22 and help lead the fight to kill it. Some of that was done in Massachusetts.

Once the decision is to build it, then I'm obligated to support some of it going in my area. But I would vote tomorrow to cut out the whole F-35 program. I think it's not necessary and doesn't advance the security.

OLBERMANN: I imagine it would also be easier to do that as part of a comprehensive cutting of the program - of the entire budget.

FRANK: Yes. The key is - if you do this weapon by weapon, you lose, because we can't concede to the defense establishment the need for America to be everywhere and protect everybody. Once you concede that, you fight a losing battle, weapon by weapon. What we have to say is let's protect our national security interests. Let's be available for those few allied, Democratic allies that are genuinely menaced.

But that doesn't involve most of our spending and most of our military bases. We have military bases - Walter Jones makes this point - hundreds of bases in 38 countries that do not, in most of those cases, advance American security. Then, of course, you and I both agree we have not only wasted a trillion dollars in Iraq, but damaged America in the process. So we paid a trillion dollars to lose American lives and damage our ability to influence the world in a constructive way.

OLBERMANN: Well put. In the issue of foreign military aid, well put, as well. Congressman Barney Frank, Democrat of Massachusetts, as always, a pleasure, sir. Thanks for your time.

FRANK: Thank you, Keith.

OLBERMANN: OK, Sharron Angle compares himself to a former American political figure. Amazingly, it's not Sue Lowden. And she threatens suit to keep her words during the primary being readable during the election.

And spewing pure racism, Limbaugh says the president would not have been elected had he not been black, and then goes a step further, possibly off a cliff.

And when Rachel joins you at the top of the hour, live from Afghanistan, she will discuss whether the counter-insurgency plan is working with the general on the ground trying to implement it.

(COMMERCIAL BREAK)

OLBERMANN: Limbaugh finally comes out and says it: Obama was elected only because he is black. But this time he adds somebody bigger even than Obama, perhaps. First, no, it's not your water coming to a boil. It's our nightly checkup on the something for nothing crowd. It's Tea Time. If I asked you which Tea Partier was likeliest to compare themselves to Abraham Lincoln, could you guess? Yes, it's Sharon obtuse Angle from Nevada, in the middle of a fawning interview with a supporter who confessed to once predicting she would not win the nomination.

(BEGIN VIDEO CLIP)

BILL MANDERS, SHARRON ANGLE SUPPORTER: I said you've lost; how are you going to win this? I don't possibly think that you're going to win it.

SHARRON ANGLE (R), TEA PARTY CANDIDATE FOR SENATE: That's right.

MANDERS: And then you surprised everybody and won this nomination.

ANGLE: That's right.

MANDERS: This opportunity to run against the beast, Harry Reid.

ANGLE: Well, you know, it's just like Abraham Lincoln. He lost quite a few. But he won the big one. He won the one that mattered for this country. And really that's what we're in.

MANDERS: Do you think you're too -

(END VIDEO CLIP)

OLBERMANN: Oh, now you're Abraham Lincoln? I'm beginning to doubt you're even Sue Lowden. Just for the record, do you know how many elections Abraham Lincoln lost in his lifetime? The Illinois state assembly in 1832. He prevailed in four elections for state assembly, one for Congress, two for president. Seven Of eight he won.

Sharron Angle, I knew Abraham Lincoln's won-loss record, and you're no Abraham Lincoln.

(COMMERCIAL BREAK)

OLBERMANN: The Senate candidate hiding her own words from the primary because they are too controversial for the general election, threatening to sue to keep her opponent from quoting them. That's next, but first get out your pitchforks and torches, time for tonight's worst persons in the world, brought to you by -

(BEGIN VIDEO CLIP)

OLBERMANN: Red Scare Skin Ointment. If you're feeling a little creeping socialism in tender spots, use what Glenn uses: Red Scare Skin Ointment. Underwriting sponsor for Glenn Beck's I Have a Scheme Speech on August 28th.

Red Scare will not cure your hypochondria or paranoia. There may be nothing wrong with you. Do not apply to skin or body.

(END VIDEO CLIP)

OLBERMANN: The bronze tonight - coincidence? I think not -

Lonesome Rhodes does not like what Will Bunch said about his new

university. Whatsamatta (ph) U. Called him out by name today. First on

Will's assertion that he is giving them what they want, what they're giving

him, what he wants, cash; "I never have a problem stating to you I'm a

businessman. I'm not doing this for my health. Believe me, I'm not doing

there's other things I can do that would be healthier than this. Tell me - show me - I'm sorry, Will Bunch. Show me exactly where our health care is in the Constitution. Show it to me. Where is it?"

I guess Medicare and Medicaid are also unconstitutional, Glenny? Hey, seniors, Beck just came out against Medicare and Medicaid. Since it's not in the Constitution, social Security, too.

Our runner-up, Congressman Steve King of Iowa. Not even many Republicans went this far down the rabbit hole as has Mr. King about the Gulf disaster: "as I watch the reluctance on the part of the White House to cooperate with Bobby Jindal, I'd like to think it's being done out of policy perspective. But there's a political component. And to delay these skimmers all the time and refuse to waive the Jones Act" -

Mr. King apparently believes the Jones Act refers to Jones brown and serve sausages. The Jones Act is actually a law requiring that all good shipped from one American port to another be carried by American ships. But it only applies inside the three-mile limit. The Deepwater Horizon spill is 52 miles offshore. They don't need to waive the Jones Act, because the Jones Act it doesn't apply.

As of June 15th, the Coast Guard reported there were 15 foreign ships helping with the cleanup in the Gulf. An independent report last week counted 24 of them from nine different countries. Congressman King is just making this crap up, as usual.

Speaking of which, there's tonight's hands down winner, Boss Limbaugh. These quotes speak for themselves and for a diseased and failing mind. "If Obama weren't black, he'd be a tour guide in Honolulu or he'd be teaching Saul Alinsky Constitutional law or lecturing on it in Chicago," said the college dropout, Rush Limbaugh. "He wouldn't have been voted president if he weren't black. Somebody asked me over the - oh, I need to remember. Somebody asked me over the weekend, why does somebody earn a lot of money, have a lot of money. I said it's because he's black."

This the guy who once said the media was conspiring to make Donovan McNabb of the Eagles to be a better quarterback than he actually was because he was black. "It, Limbaugh said, "was Oprah," said the guy who doesn't have half Oprah Winfrey's talent, or income. "No, it can't be," he continued. "Yes, it is. There's a lot of guilt out there. To show we're not racist, we'll make this person wealthy and big and famous and so forth."

There it is. See, the United States is tilted in favor of black people. That's the premise. We have made it so easy that human beings inferior to the great Rush Limbaugh, the fired by ESPN one month into his dream job, Rush Limbaugh - inferior creatures like Obama and Oprah Winfrey have been made wealthy and big and famous and so forth. They have not earned it. They aren't actually talented. They haven't actually done the job. Oprah Winfrey and Barack Obama and presumably every other black person in this country has not succeed despite the fact that they're black, when this country is still filled with racists like this homunculus Limbaugh. They've succeeded because they're black, and only because they're black.

Well, you heard it. It's naked, ugly racism. It's the distillation of Rush Limbaugh's view of our country. The only other thing I can say is, Oprah, please, crush this schmuck, huh?

Rush Limbaugh, overt racist, today's worst person in the world.

(COMMERCIAL BREAK)

OLBERMANN: How do you go from Tea Party extremists to conservative alternative to Harry Reid? Use the Sharron Angle method, scrub your website of the positions you held in the primary, make up new ones for the general election, and take legal action against your opponent for posting the aforementioned positions you held in the primary.

Our number one story, Sharron, just like Abraham Lincoln, Angle threatens to sue for her right to lie about herself. Nevada's Republican Senate candidate reinventing her website with very little fanfare. Gone are the platforms about abolishing the Department of Education, privatizing Social Security, the call to repeal regulations that prohibit offshore drilling.

Sharron Angle 2.0 telling voters that education decisions are best made at the local level by parents and teachers. Government should keep the promise of Social Security. And with respect to offshore drilling, enforce the rules and regulations currently on the books.

Senator Reid's s campaign republished the original Angle website, calling it the real Sharron Angle. Angle's campaign then sent the Reid camp a cease and desist letter, accusing it of misappropriating copyrighted materials, capturing the names and emails of Angle's supporters under false pretenses.

For a time, Senator Reid's took down the Real Sharron Angle Website, instead rerouting visitors to a different one named Sharron's Underground Bunker, and after a few changes, put the original Real Sharron Angle Website back up.

Sam Stein of the "Huffington Post" reports the National Republican Senatorial Committee says Mrs. Angle's upgrade is normal. "Many campaigns revamp and relaunch and enhance websites over the course of an election season, and Sharron Angle's positions have not changed."

Tell that to Sharron Angle. Admitting to supporter Bill Manders in the same radio interview in which she compared herself to Abraham Lincoln that she's, quote, softened positions because, quote, "I'm being held accountable for every idle word, as you know."

Meanwhile, over in Kentucky, Republican Senatorial candidate Rand Paul having to explain a few of his own contradictory positions. Doctor Mr. Paul previously against building a fence along the U.S./Mexico border. His website, however, recently said he was for it, specifically an underground electric fence, with helicopter stations to respond quickly to breaches in the border, and flying parrots, lots of parrots.

Confuse ensued, forcing Mr. Paul's spokesman to clarify. A, I made up the stuff about the parrots. B, he said the website is wrong. The fence that Mr. Paul originally opposed - Doctor Mr. Paul - and now supports will still be electronic, but above ground. And, quote, "that's a stupid word that was put in by whoever is writing for our website."

Bus and website master. Time now to call in MSNBC contributor, Washington editor for "The Nation," Chris Hayes. Chris, good evening.

CHRIS HAYES, "THE NATION": Good evening, Keith.

OLBERMANN: Long sleeved shirt, I see.

HAYES: Yes, I didn't have time to - I didn't think I was big-time enough to rock that the way the congressman from Massachusetts did.

OLBERMANN: Try it out. The Angle angle first here. This is really heavy stuff. I don't want to pound a cliche into the ground. But it is literally Orwellian. To threaten to sue to keep your old quotes off the Internet?

HAYES: It's also stupid. The whole point is that you don't want to put press attention on what the old positions are. By initiating a story that's going to motivate a whole another news cycle or two or three, depending on how the Reid camp responds, you ensure that everyone is going to be talking about it. So I don't know if it's just stubbornness or it's just a sort of rookie/amateur move, but it's just not very good politics, aside from the facts that it seems like crappy law.

OLBERMANN: Also, there is a sort of naivete that is running through Mrs. Angle, as we see her on the big-time stage. And the other quote about every - what was it? Every random word or every -

HAYES: Right, every idle word.

OLBERMANN: You're running for office; idle words are what you say you're going to do, aren't they?

HAYES: Right. I thought that quote was so interesting, because, basically, she was saying, look, I've been saying totally crazy, impractical, extreme things for a very long time and no one has noticed. All of a sudden now, people take them seriously because I might be in the United States Senate. It's so weird.

Yes, that's exactly the whole point. That is the whole point that these candidates have faced from the beginning. I mean Angle and Paul and other sort of Tea Party candidates who have entered the lime light. It's OK to have extreme positions. There are some extreme positions that make sense. But they are going to rub up against an electorate that is not inclined to partake in them.

Most people don't agree with, say, phasing out Social Security. She either sticks to that position or she renounces it. But she can't have it both ways.

OLBERMANN: Time and again, the GOP establishment has been put in a position to defend a Tea Party candidate who then crosses over. The NRSC had to do it with Angle. "Huffington Post" reports that the chair, John Cornyn, is baffled by the Rand Paul fence proposal. Now, public policy polling shows that Paul is in a dead heat in Kentucky against Jack Conway. How is that possible? I've been told it's all MSNBC prime time's fault that he got such a bum rap.

HAYES: This is exactly the issue. Rand Paul is not - he has views that are really out there. If the electorate, even the Kentucky electorate, which is quite conservative, is exposed to them, they're going to recoil. People who are - the kind of strategic minds behind this, Dick Armey, for instance, understand that. They understand that they're cultivating people who come from really, really extreme ideologically zealous places and trying to make them into mainstream candidates.

For all of this sort of patina of reasonableness that hung around the Tea Party I think for the first six months it's around - I think what this has helped do is scrub that away. We see it in the polls. People now understand the Tea Party movement is a very ideologically extreme and zealous movement.

OLBERMANN: You use the phrases "strategic mind" and "Dick Armey" in the same sentence.

Chris Hayes of "The Nation," thanks Chris.

HAYES: Thank you, Keith.

OLBERMANN: That's Countdown for July 6th. It is the 2,623rd day since President Bush declared mission accomplished in Iraq, the 2,212th day since he declared victory in the Afghanistan, and 78th day of the Deepwater Horizon disaster in the Gulf. I'm Keith Olbermann, good night and good luck.

Now, with the goods from the scene, is the counter-insurgency strategy working in southern Afghanistan, ladies and gentlemen, here is Rachel Maddow, live and direct from Kabul. Good evening, Rachel.

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