>> this is the "the chris matthews show." >> ask not what your country can do for you. >> tear down this wall. >> i can hear you. >> the time for change has come. chris: winner at year's end the poll numbers are heading down with the weather. will the republicans buy more compromises like the tax cut deal? democrat stay loyal? and can an unhappy center be brought aboard for the heavy lifting? the professional left, that's what the white house callsts progressive flank. but what's been driving the tempest? what's sparking the anger? and finally, boxed in pi the brass, will the generals who kept obama with him on afghanistan a year ago by the

holdup -- by holding up this withdrawal? i'm chris matthews. welcome to the show. with us today, the huffington post, howard fineman, the bbc's katty kay, nbc's norah o'donnell. and time magazine's joe kleine. first up, the president's tax cuts deal. may turn out to be a textbook turn of the corner for a president sorely in need of one. he's got a very big advantage for 2011, a new abc news-"washington post" poll shows americans favor obama to make progress on the big issues facing the country. more than they favor republicans to do it. but he still needs working partners. another new poll, this one from nbc, shows the democrats out there are eager for democrats here in washington to help the president. 6 3% of democrats polled say they support more deals with republicans, despite those house democrats voting against the tax cuts deal. but just 47% of republicans tantwheir leaders to keep compromising with obama. howard, it's so interesting. the democrats come out of the election, they realize they

lost, i gegs. it's time to deal. republicans come out of election, we won, no deal. >> that's what the numbers show. but i think the imperative is for the next two years is going to be the president trying, and i think more than we might suspect, succeeding with the republicans in making deals. particularly on spending. get the tax cut thing. that's happened now. that's in place. next obvious thing to discuss is really trying to get the budget deficit and the debt under control. doing real spending deals. and i think there's a very good prospect of there being a big one at some point in the next year with the republicans. chris: is there a chance he could do one of those wonderful leapfrogs where he goes to the tea party mentality and says we agree on something. we all agree we have to get long-term spending down. joe? >> i think it's going to be hard. because the republicans aren't going to compromise in this area. and for him to make a deal on something like medicare, he's going to have to go to privatization. which is in effect what pau ryan wants. and i think that the best dea l he can make with the

republicans has already been made. chris: sot's getting tough but has to do it. if he doesn't cut a deal with the republicans where's the deal? >> i think larger framework in which he's operating which the democrats and the republicans are operating, is that america is fundamentally a center-right country. and so the left of the democratic party has more compromising to do to get to where the middle of the country is. where the republicans don't have that much. it was indicative this week when we heard sarah palin on good morning america saying the president had flip-flopped on the tax cuts. not that he had compromised. there was no sense that he had done the right thing. he had flip-flopped. which gives me some insight into how republican thinking is. and tea party thinking is. they're not going to cut this guy any quarter. no matter how much compromising. chris: it's a right wing party. and he has to win them over. and it's going to be -- they're going to have to make a decision somewhere dow the road about whether they want to retain their seats or play for the next presidency. chris: isn't the deal problem

this, if you listen to the tea partiers, not the way liberals want to listen but actually listen to them, they don't talk about deficit reduction. or debt reduction. they talk about spending reduction. they don't want to hear about taxes going up as part of any deal. and isn't that the part's problem, norah? and he has -- his idea is he can't sell anything -- he can't sell anything to his party unless he includes some kind of revenue increase with the spending cuts. >> no doubt. and look, any expert, that's studied this as a republican or democrat, acknowledges they're -- there are going to have to be spending cuts but revenue increases. >> you're right. the focus is on spending. but what he's going to do on taxes is propose some kind of big change in the way we think of taxation to begin with. in other words, he's going to go big on it. as a way of engagerring the republicans including the tea party people in in a discussion. a lot of the tea party people are in favor of a flat tax of some kind. if the president is going to try to draw them into that discussion. let's -- >> the bigger hekshin t and

more outside the box the better chance he has to get over the problems joe's talking about. chris: so much like reagan. first ideological thrust and then the pullback and then some synthesis down the road. >> the president has a chance -- make common cause with some tea party people. as you were saying, chris, on some of these things. he can call their bluff. and say come on. let's make -- let's do the big radical transformation stuff you're talking about. that's what he's going to try to do. >> you have had a few voices from the tea party who have come out since the tax cut deal saying we shouldn't be giving this kind of a stimulus package. that's been interesting that you've had the odd voice out there, there's room to pick out those people and say we can work with -- >> cutting spending, the reality is that we haven't seen any evidence at all, during my lifetime, that the democrats or republicans can cut spending. >> but that provides the president with the opportunity to get in there and having done these stimuli -- chris: we ask politicians on

interview programs, tell knee what you're willing to cut. and they go to nothing. >> and i think there's also a fundamental misunderstanding. we're going to cut waste and inefficiency. >> waste, fraud and abuse. >> which amounts to almost nothing. >> and how many politicians can tell you what the federal budget was in 2010? which is that this government spent $3.6 trillion and took in $2.2 trillion in revenue. do the math. how much does that leave us in a shortfall? >> america stopped having people writing on the streets, like we saw in london just a couple of weeks ago. then you will know that you are really cutting spending. because point is people are not angry because spending isn't being cut. >> they don't mind borrowing at all. and i have to go to the bottom line. we put it to the matthews meter which will elucidate much of this. 12 of our regulars including all four of you today, when the president needs compromise who has more interest in helping him. eight say the g.ohe. t republican leaders, will have more interest in compromise with the president. and four say democrats on the

left will be his partners. howard, katty and norah, you three here, this -- are with the eight that say his partners are going to be the republicans. howard? >> i think so. because the left wing of the democratic party is going to be busy trying to find its own identity and argue about what the democratic brand is and all that kind of stuff. and obama's going to be trying, i think, succeeding, do get a deal. chris: that's the pattern established this week. >> the tea party is the force. the democratic left is not. chris: everybody likes lower tax rates. and everybody says at least they hate loopholeless. isn't there a potential, this is what bill bradley did, lower the rates by increasing revenue by plugging all these phony loopholes that the corporations and the people with special interests get through offer the years. >> that could be done. >> and the deficit commission said you could find $1 trillion by closing loopholes and everybody from warren buffett to bill gates, billionaires -- >> there's one difference between now and 1986.

and that has been the exponential growth and power of lobbyists. lob yists protect loopholes. they're going to win. they won on the financial regulation reform. they never lose. chris: are you the grinch? [laughter] >> that very fact i agree with you, but that very fact is an opportunity for the president to finally be -- he's going to raise a billion dollars for his campaign. they're saying. so how does he do that? but that aside, if he takes on that issue, again, he'll have common cause with the tea party. chris: one more reference point. in that war, when the -- when the british were loserring to the nazis they did one smart thing. they got off the continent of europe, they escaped with dunkirk and great strategic withdrawal. has the president fecked something like that -- effected something like that?

>> the answer is yes in the short term. if they had not done the deal the republicans can come back, cu t taxes are the rote actively and claim credit for it. -- taxes retroactively and claim credit for it. i don't want to be naive here, but i do think that the dynamics are such that because the tea party is basically in charge of the republican party, that's actually more of an opportunity for the president than people think. chris: katty. >> i think it was brilliant in the sense that it deprived the republicans of the ability to claim credit for it. that was clearly a strategic coup. it's still hard to say -- still some very intransigent voices among the republicans on capitol hill. and how much they're -- we heard them after the midterms. what they said, mitch mcconnell, and john boehner, doesn't sound like a party that's -- chris: and we watched the president the last week or two and all students of this president. has he gottenis groove back and strong personally about how he's leading the country right now? does he feel he hags the office in hand now?

>> i think the white house feels very good about it. because they not only use the powers of the presidency, they called in bill clinton, the communications team, feels like they were firing on all cylinders. and they can claim some sort of deal that got done which in wfectas a large stimulus for the american people. with that behind them, they feel they can use that to get other things done. >> i hate the notion that all these people who brought on the 2008 is to be market crash, these financial speculators, get more money back in taxes. a great deal for the president. it was a great political deal. chris: is he back? >> the question is, where he can go from here. that is going to be determined by the republicans. i think that the republicans are going to have to make a calculation as they watch the public. the public wants to get things done. the republican party's only playbook has been cut taxes, and -- chris: they want the president to take the lead as they always do. this week's new yorker magazine has a great piece by ben greenman with some serious

leaks from the north pole. things are far from airtight up there as santa's workshop. the magazine got ahold of 100,000 documents from of all people a disgruntled he will of. -- disgruntled elf. the song "i saw mama kiss santa claus." a previous base to that, the elves were wried for years about santa's philandering. which began only recently after mrs. claus discovered an illicit message from an arizona school board member. also in that stack of leaked documents, a reported mixup in 2004 that brought a young 11-year-old named jack howard, a book of math games, instead of a football that he asked for. and no accident according to these leaks. sanda was sending a message. also it can be revealed that senior north pole officials were astonished with an elf actually proposed holding the long-standing program to monitor pouting and crying.

and that enormous document dump, a north pole study exposing santa's extreme pickiness. the study shows photos that proved that long-standing rumor that santa feeds most of the cookies that we leave out for him to his reindeer. when we come back, is the president watching afghanistan, the decision forced by the military? will he give deference to them if they want more time than he thinks the country will give? scoops and predictions right out of the notebooks of these top reporters. we'll be right back.

chris: welcome back. it's been a year sense the president-elected to build up the forces in afghanistan. last month he extended the team line through 2014. after his promise december review this week he reiterated that goal. >> we're going to have to continue to stand up. we will never waver from our goal of disrupting dismantling and hopefully defeating al

qaeda. chris: joe, what's happening in afghanistan? is it generals calling the shots? what are you seeing over there? >> it's a negotiation between the president and david petraeus. they kicked the can down the road with this policy review. but what petraeus has in his corner is the fact that we've had a very strong fighting season there. we've kicked the taliban out of their homeland in kandahar province. everything is going to -- you aren't going to see very many troop reductions in this coming july. everything's going to depend on the next fighting season which takes place during the summer. and whether the taliban are able to come back to their that is rightland successfully or not. if they're not able to come back successfully, then we're going to be able to bring -- begin bringing troops home a lot at the end of 2011. and early 2012. if they are successful, then we're going to start bringing troops home anyway because it will be such a mess and the president will -- chris: joe said they're on the same page. my question is political. is this president now committing to winning in

afghanistan? or staying there long enough to achieve petraeus' ambitions? >> oh, no. i don't think so. i think the president is committed to making the best effort he can and -- over the next couple of years. but the political realities are such that he can't commit to forever. because the american people are tired of what is now the longest war in american history. it's very unpopular. and people do not see the connection between this and their own safety necessarily. and the president is trying to be the good soldier for the good soldier. but that's not going to last forever. and he's going to make that clear because he's going to disappoint the left wing of his own party on many other things here. we were just talking about in the earlier segment. he can't really disappoint them on this in the end. >> but there's a risk also that he disappoints republicans as well on this. because they would be for staying with petraeus. and petraeus is still very popular in the republican party. and the risk is that -- the big question about afghanistan is we stay for another fighting

season or another year. you make the -- make the kind of progress that joe saw on his recent trip. but if we don't have the political will, and the afghan government doesn't have the political will to halt that it would have been for nothing. this could slip back incredibly fast. >> and the president of the united states or david petraeus, one is the government of afghanistan, which is -- as katty said has to win the hearts and minds of the people. now that the taliban -- chris: what makes you optimistic that will happen and ever become a popular government there? >> the cash. i think that there's a lot of cash being spread around to -- chris: what happens when the cash runs out? >> it won't for a couple of years and maybe by then build a government. a lot of people working for $5 a day cleaning canals and who weren't working before. chris: whose money is that? >> u.s. money. who else's money would it be? they're willing to do it now. and risk the taliban coming and killing their families. because they don't think the taliban is going to get to come back. that's good news. the other factor here, wigs the

most important one, is pakistan. the most terrible taliban faction, the hakani network, is operating not only out of pakistan but with the support of pakistan's intelligence agency. chris: that's the problem. how does the war ever end? >> i don't see how they hold it. >> there are leaks that we're going to start doing a lot more aggressive special ops. chris: you cover the hill and everything else. the politics of this seem to be dreadful. >> the politics are dreadful. as the president tried to sum up and sort of polish up this review on by saying they're making progress, but of course it's fragile. the progress that's being made. there's also political calculation which is that this president campaigned on and promised to end the wars in iraq and afghanistan. in a reasonable way and coming up on a re-election and no doubt the president wants to say it's the most liberal wing of his party to say mission accomplished in terms of ending those two wars. that's a political calculation. although i don't know how much that plays. i think the president has already made clear that he wants to try and do what's in

the best interests of our military and national security. >> you're going to see siificant troop withdrawals one way or the other in 2012. chris: i don't think it's just the left that's against this war.

chris: welcome back. tell me something i don't know. howard. >> elijah cummings is a name you haven't heard much but you will start hearing about. a very bright and effective congressman from baltimore. and he will be with darrell issa, the republican who will want to investigate everybody,

subpoena everybody, elijah cummings will be the democrats' hope of keeping that in some kind of reasonable shape. he's going to be on the headlines a lot the next couple of years. chris: katty kay. >> he was reading the european press after dick holbrook died. so tragically this week. and i was just amazed at the amount of coverage there was. it was front page story in europe. chris: why over there? >> because of bosnia. he is credited with the dayton accord which brought peace to the war in bosnia and a war europeans couldn't solve in their own back yard and were thanking dick holbrooke for the work he did on that. chris: norah. >> the president will use the new year and his state of the union address to call for a fundamental overhaul of the u.s. tax code. including the closing of a lot of these loopholes, and other things that could save over a trillion dollars and -- chris: will it be spending reduction or what will be the lead, tax reform? >> i think it will be both. because they're together. this -- overhaul of the tax code which everybody wants. and it will help reduce the deficit.

chris: joe. >> not a prediction but a thank you. this program is picked up by armed forces network. it's watched on bases throughout the world. including in war zones. and i just want to say thank you to our troops who have done such an amazing job. and a special thank you to the kids from the fourth infantry division. and also the 101st airborne who protected my old sorry butt. chris: the big question this week, does sarah halinthave e possibility to significantly improve her negative ratings? pb right back. -- be right back.

chris: welcome back. sarah palin has a popular show on t.l.c., regular spot on fox news and done a few moron views but in the new nbc poll palin has a 50% negative rating and 63% negative rating among moderate voters. which brings us to our big question this week, with all she's doing now, does palin have the possibility of turning that huge negative number around? howard. >> so how is that tweedy outdoors thing doing for you? i don't think she's made any progress. she could stin win the republican nomination and a crazy world out there but hasn't helped herself at all. however famous she is and how many tweets. chris: katty.

>> one indication the ratings between her first show and alaska and her second show fell by 50%. which suggests that she's not winning many converts. a lot of people who love her but trying to get those people who don't to stay with her is not going to be easy. chris: what can she do to improve her situation? >> i spoke with the republican hatch of our poll, bill mcenturf who polled for mccain-palin and said these are her highest negatives ever and does not do well among independents and downscale women. she can win the republican nomnakes but any shot at winning a election she has to significantly improve those numbers and hard because the cake is baked in many ways on her. everybody has an opinion about sarah palin. chris: and it seems to be rning. there's something wrong here. doing soft things, like t.l.c. and the woodsmen stuff and it seems to be -- it doesn't seem to be making friends. >> she's becoming a much better reality tv star. but she's not a politician. the only thing that she can do to turn around her image as a politician as opposed to a

celebrity is to take a creative , interesting, brave position on some issue. she has no positions on any issue. >> yes. >> at first it was really cool to be a celebrity politician. but to have minded to the extent that she has, makes everybody thinking maybe that's what she's in this thing for. and not preparing in any serious way to run. chs: and america's boredom complex. we get bored with politicians. and thanks to a great rournedtable. howard fineman, katty kay, norah o'donnell and joe klein. that's the show. thanks for watching. have a wonderful christmas. and see you here next week. - hello! - ha! why don't you try a home cooked meal... with yummy hamburger helper?

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